Microsoft reports second-quarter earnings after the bell Tuesday, and though some analysts predict the bottom line may come in light, they think the stock is a buy.
The reason: The company's cloud business is gaining momentum, several said.
"We believe its best cloud days are ahead given positive checks from the field around solid uptake of key cloud products (e.g., Office 365, Azure), which we believe were stronger than Street expectations in F4Q, and as Microsoft looks to strike the right balance of growth and profitability around its cloud endeavors with solid momentum heading into FY16," FBR Capital Markets' Dan Ives said in a note Friday.
Ives' firm maintained its "outperform" rating and a price target of $53 a share.
Frederick Grieb, executive director at Nomura Securities, said in a Jul 15 note that "as consumers look increasingly to the cloud, we believe Microsoft can leverage its existing relationship with with enterprise customers to sell more premium workloads and services in the cloud."
Nomura reiterated its "buy" rating on the stock with a price target of $55 per share. It was trading around $46.65 on Monday afternoon.
Wall Street expects the behemoth from Redmond, Washington, to report profits per share of 56 cents on revenue of $22.05 billion, according to a Thomson Reuters consensus estimate.
The company has been undergoing a shift in its core business, moving from PCs to the cloud, since Satya Nadella was appointed CEO on Feb. 4, 2014. Microsoft shares have risen over 4 percent since he took over.