Deutsche Bank analyst Karl Keirstead has upgraded Microsoft from Hold to Buy. He also raised his price target from $44 to $55 per share. He thinks the Microsoft’s stock is inexpensive and that the near future won’t bring much downside.
Even though his predictions did come to pass, however, Keirstead said Microsoft shares didn’t take as much of a hit as he thought they would. Wall Street did trim estimates for the software giant’s earnings, and the analyst said they now reflect the weak sentiment on the PC market. He added that the Street is also finally factoring in “investor enthusiasm” on Office 365 and Azure.
He calls Microsoft shares “relatively cheap” because they are trading at around 15 times the estimated 2016 non-GAAP earnings per share and about 11 to 12 times estimated free cash flow for 2016. He also said he doesn’t see many downside catalysts for Microsoft in the near future.
Even though Microsoft’s Windows business is going down, analysts bullish on strong performance from Office 365 and Azure growth from the enterprise.