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Microsoft 3Q Will Be ‘Calm Before Storm’: Analyst

Microsoft Corporate Headquarters
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Microsoft Corporate Headquarters

Microsoft’s fiscal third-quarter earnings will be “the calm before the storm” when the software giant unveils updates of three of its biggest high-profile areas later this year.

“It’s a transitional quarter for Microsoft . I don’t think investors are as focused on this current quarter,” UBS analyst Brent Thill said in an interview on CNBC’s “Power Lunch.” “Investors are more focused on the next couple of quarters.”

By year’s end Microsoft’s Windows 8 operating system will be on the market as will its Windows Server. Thill believes its Office 15 software will be available at the beginning of 2013.

“The PC market’s been asleep,” said Thill, who has a $36 price target on the stock and a “buy” rating. “Everyone’s been getting tablets” including his family’s household. “But we’re going to go back to looking at PCs at some point because of the [product] refresh cycle.”

UBS expects Microsoft to report third-quarter earnings of 58 cents a share, one cent more than the analyst consensus, on revenue of $17.3 billion. That compared with $17.1 billion for the consensus. It is scheduled to report earnings Thursday after the New York markets close.

Thill said Microsoft is “one of the cheapest names in our group compared with, say, Oracle.” Unlike others on the Street, he added, Microsoft is going to reaccelerate revenue growth and reaccelerate operating margin.

“It’s not expensive relative to the market,” Thill said. “You’ve got some expensive homes in the software market. Microsoft is not one of them.”

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Disclosures:

Thill, his family, and his company own Microsoft shares. UBS also has an investment banking relationship with, and has received compensation from, Microsoft.

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