MSFT Stock: Microsoft’s Cloud Bet Pays Off With Solid Earnings

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Microsoft Corp (NASDAQ:MSFT) shares hit an all time high in after-hours trading Thursday, gaining $3.49 to $60.74, after the company reported its first-quarter 2017 earnings results that easily beat analysts’ estimates even as Windows revenue growth came in flat.

The software giant reported earnings of $0.76 per share on revenues of $22.33 billion, up 3.1% from a year ago. Analysts were expecting EPS of $0.68 on revenues of $21.69 billion.

Microsoft’s CFO, Amy Hood, commented in a press release that “Our first quarter results showed continued demand for our cloud-based services.”

The Redmond, Washington-based company said that revenue from its cloud computing product ‘Azure’ spiked 116% while revenue from the overall “Intelligent Cloud” business rose 8.3% to $6.38 billion, beating analysts’ average estimate of $6.27 billion. Server sales and cloud services revenue also grew, printing an 11% increase in the quarter driven by Dynamics online revenue growth.

Meanwhile, Windows revenue from original equipment makers of PCs came in flat. That’s better than the world-wide PC market as a whole, which dropped nearly 4 percent in the quarter that ended September 30, 2016.

Over all, Microsoft posted $4.7 billion in first-quarter net income, or $0.60 a share, compared with a $4.9 billion profit, or $0.61 a share, a year ago.

“We continue to invest, position ourselves for long-term growth, and execute well across our businesses,” Hood remarked.

Microsoft stock currently prints a one year return of about 25% and a year-to-date return of around 5.5%.

Paypal Holdings Inc (NASDAQ:PYPL) rallied $1.71 to $41.80 in after-hours trading after it reported fiscal-third quarter earnings.

In its quarterly report, the payment company said it earned $0.35 per share, in-line with the analysts expectations. Revenue rose 18.1% y/y to $2.67 billion, above views for $2.65 billion.

“The opportunities for PayPal to grow and gain share have never been greater,” CEO Dan Schulman, who expanded the company’s market share with deals with rivals Visa and MasterCard said in a statement. “We are further expanding the ubiquity and value of the PayPal brand and moving deliberately towards achieving our vision of becoming an everyday, essential financial service for people around the world.”

The San Jose, Calif.-based company said it grew its active customer accounts by 11%, ending the quarter with 192 million active customer accounts. The number of processed transactions jumped 24% to 1.5 billion, marking a 13% increase from a year ago. Total payment volume was $87 billion, representing growth of 25%, “which was faster than the growth rate of e-commerce,” the firm said.

Looking ahead, the company guided 4Q16 revenues of $2.92 – $2.99 billion, as compared to analysts’ expectations of $2.97 billion. The management also gave its bottom line range of $0.40 – $0.42 per share, against projections of $0.42 per share.

On valuation measures, Paypal Holdings Inc has a median Street price target of $45.50 with a high target of $54.00. Currently PYPL boasts 23 ‘Buy’ endorsements, compared to 15 ‘Holds’ and 1 ‘Sell’.

The name is up 18.50% year-over-year and 10.75% year-to-date.

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