Microsoft stock (NASDAQ:MSFT) was up 3.5% at 1:31 p.m. ET on Monday on positive analyst remarks. Mizuho Securities and Morgan Stanley both maintained their overweight and bought recommendations on Microsoft ahead of its next earnings announcement on October 25.
Analyst comments often carry little weight for long-term investors due to Wall Street’s short-term concentration, but these calls underscore Microsoft’s dominance in a relatively poor PC market. Microsoft has a diverse income stream spanning consumer and business industries, which Morgan Stanley thinks will help offset the PC industry’s short-term downturn.
A sluggish PC market has sent Microsoft stock (NASDAQ:MSFT) down 30% year so far, behind the 23% fall in the S&P 500 index.
So, what’s the deal?
PC shipments declined 15% in each of the past two quarters, raising concerns about Microsoft’s revenue growth. Nonetheless, Microsoft reported 12% top-line growth last quarter, or 16% on a constant-currency basis.
Microsoft stock (NASDAQ:MSFT) is doing well in a difficult climate. Last quarter, corporate services, including Dynamics 365, LinkedIn, Azure cloud, and Office 365 Commercial, were the most profitable.
As predicted, the poorest categories were consumer-related. On a constant-currency basis, Xbox gaming revenue decreased by 4%, while sales of pre-installed versions of Windows to PC makers dipped by 2%. These two segments are expected to exhibit weakness in the next quarterly report, but commercial growth should push Microsoft ahead.
So, what now for Microsoft Stock?
To account for the declining PC market, Morgan Stanley decreased its fiscal first-quarter sales forecast by just 1%. After getting positive feedback from commercial clients in channel interactions, analyst Keith Weiss thinks Microsoft’s commercial business will stay resilient.
Microsoft’s high-margin revenue streams from subscriptions and cloud services are boosting the company’s capacity to generate extraordinary amounts of free cash flow, which has increased to $65 billion in the previous year. Microsoft has a lot of cash, which allows management to keep investing for long-term development in various specialist areas.
Featured Image – Megapixl © Wolterk
Author Okoro Chinedu 
