Morgan Stanley analysts optimistic about Microsoft

Morgan Stanley analysts optimistic about Microsoft

By Kristina Sobol 

Budrigannews.com – Morgan Stanley analysts defended Microsoft (NASDAQ:) in a Wednesday note to clients, despite the fact that the company is in a good position, it is not immune to macro headwinds.

In a research memo to investors, the analysts with an Overweight rating and a $307 price target on the stock stated that a challenging backdrop into CY23 is created by moderating IT and software budget growth and an unfavorable up-to-down budget revision expectation.

Morgan Stanley, on the other hand, believes that Microsoft will gain market share because of its “strong positioning addressing CIO priorities and secular trends” and “benefitting from vendor consolidation.”

“The Morgan Stanley AlphaWise CIO Survey Finds Moderation in IT Spending, Despite Microsoft Screening Outperforming Most Given Its Position.” Our 3Q22 survey found that CIOs now expect software spending to rise by 3.6 percent in 2022, which is down 10 bps from the previous estimate.

Additionally, “the analysts write that the software spending growth expectation for 2023 is at 3.3%, which is lower than the current reading for 2022.”

Microsoft remains better positioned than most in a downturn, according to several forward indicators in the CIO survey, according to the analysts, even though growth expectations remain low.

“Due to the transition to the cloud over the next three years, Microsoft continues to lead in anticipated IT budget gains.

In point of fact, Microsoft’s advantage over Amazon (NASDAQ:) grew. The analysts provide an explanation for this: “With 48% of the CIOs surveyed now expecting Microsoft to see the largest incremental IT budget share gains over the next three years on a net basis,” as compared to 15% for Amazon, which is ranked second.

“Digital transformation, AI/ML, security software, cloud computing, DW/BI/analytics, and Microsoft remains well-positioned within key spending priority categories.”

In addition, they informed investors that Microsoft “appears poised to benefit from an accelerating vendor consolidation in areas like Data Management and Automation,” and that it also occupies key defensive project categories such as security software, digital transformation, and cloud computing.

On Wednesday, Microsoft shares are trading 1.9% higher.