Microsoft FY 2022 Q4 Report and Price Target Update for 2023

Posted by:Alex Belov Posted on:Jul 27,2022

On Tuesday, July 26, 2022, Microsoft published a report for the fourth quarter of fiscal year 2022. In the main session, shares fell 2.7%, but rose 4% post-market due to a positive outlook for the next quarter.

Highlights from Microsoft’s Q4 Fiscal Year 2022 Report 

  1. The report did not beat the Wall Street consensus.
  2. In the segment of games and PC revenues decreased.
  3. Azura’s revenue growth has slowed.
  4. The positive forecast for the next quarter was the reason for the growth of shares in the postmarket.
  5. A strong dollar negatively affected international sales of Microsoft.

Key financial indicators

  1. Revenue: $51.9bn (+12% YoY), slightly below Wall Street’s $52.4bn forecast. 
  2. EPS was $2.23, lower than Wall Street’s forecast of $2.29. 
  3. Operating profit: $20.5bn (+8% YoY) 
  4. Net income: $16.7bn (+2% YoY) 

The decrease in sales of Microsoft products was influenced by several factors at once: the curtailment of operations in the Russian market, high inflation, a strong dollar, disruptions in the supply chain in China due to coronavirus restrictions. Microsoft lost $300 million due to the coronavirus lockdown in China. Covid restrictions in China have negatively affected the market for personal computers with the Windows operating system. The company also lost about $100 million in revenue on LinkedIn due to cuts in advertising spending. Operating expenses amounted to $126 million due to the curtailment of operations in the Russian Federation. 

At the segment level, revenue grew almost everywhere. Most of all revenue grew in segments which are connected with cloud technologies. However, the growth rate is slowing down. For example, Azura grew by 50%+ during the pandemic, and in the current quarter, growth was about 40% (this is lower than analysts’ forecasts – 43-44%). 

Microsoft’s worst segment was video games, with revenue dropping 7%. Xbox gaming hardware sales fell 11%, while services and content fell 6%. The drop in sales is due to low user engagement. The revenues of Windows OEMs also fell by 2%. Strong dollar growth has negatively affected international sales, which have become less profitable.

 Optimistic forecast for the next quarter 

The optimistic forecast for the next quarter led to the growth of shares in the postmarket. According to Microsoft’s forecasts, sales and operating income, taking into account foreign exchange rates, should increase by 2 times. Sales forecast for the current quarter could range from $49.25 billion to $50.25 billion. In the gaming segment, revenues are likely to decrease in the current quarter. Following the report, analysts have updated their price targets for Microsoft(NASDAQ: MSFT) stock for 2023.

Forecasts, Upside Potential for Microsoft (NASDAQ: MSFT) in the Next 12 Months

Microsoft
Microsoft
MSFT
Price on July 26, 2022
$251.90 
Consensus Rating = "Buy"
Lowest Price Target
$300
Average target price
$330
Maximum target price
$410

Analysts Update Price Targets and Forecasts for 2023 Following Microsoft (NASDAQ: MSFT) Report

DATE: 07/27/2022
Analyst "Deutsche Bank"
4.5/5
Consensus Rating = Buy
Price Target Change for the next 12 months = $350 → $330
Percent upside potential for stocks
31%
DATE: 07/27/2022
Analyst "JP Morgan"
4.5/5
Consensus Rating = Overweight
Price Target Change for the next 12 months = $320 → $305
Percent upside potential for stocks
21.08%
DATE: 07/27/2022
Analyst "Stifel"
4.5/5
Consensus Rating = Buy
Price Target Change for the next 12 months = $320 → $300
Percent upside potential for stocks
19.09%
DATE: 07/27/2022
Analyst "Wedbush"
4.5/5
Consensus Rating = Outperform
Price Target Change for the next 12 months = $340 → $320
Percent upside potential for stocks
27.03%
DATE: 07/27/2022
Analyst "BMO Capital"
4.5/5
Consensus Rating = Outperform
Price Target Change for the next 12 months = $305 → $320
Percent upside potential for stocks
27.03%
DATE: 07/27/2022
Analyst "Citigroup"
4.5/5
Consensus Rating = Buy
Price Target Change for the next 12 months = $330 → $300
Percent upside potential for stocks
19.09%
Share analytics

Alex Belov

Developers by oneinveststock.com. Analyst, investor

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