Griffin Securities' Vleeschhouwer Impressed by Microsoft (MSFT) Report

Jay Vleeschhouwer, managing director of software research at Griffin Securities, joined CNBC's 'Squawk Box' to comment on the Microsoft (MSFT) earnings report.
By Giovanni Bruno ,

NEW YORK (TheStreet) --Shares of Microsoft (MSFT) - Get Report are higher by 5.22% to $55.86 at the start of trading on Wednesday morning, attributed to the company's earnings results released yesterday after the closing bell. Microsoft posted earnings of 69 cents a share on revenue of $22.64 billion in its fiscal fourth quarter. Analysts were looking for 58 cents a share on sales of $22.14 billion.

Jay Vleeschhouwer, managing director of software research at Griffin Securities, joined CNBC's "Squawk Box" this morning to comment on the company's overall performance and his biggest takeaways from what he called "an impressive report."

"First of all, they beat in all three segments, their windows business did better than we thought, the growth in cloud which more than doubled, and they were quite assertive in anticipating market expansion in the cloud business over the coming year," Vleeschhouwer noted, adding that the cloud business remains to be a key investor issue.

The increasingly successful cloud business for Microsoft, indicative of their earnings report yesterday that club revenue grew 102%, according to CNBC.com. Now the focus shifts to Microsoft tackling its competitors.

"The distinctiveness we believe Microsoft has in the cloud, albeit smaller, is the underlying functional value they have. In other words, they have Office, they have server technology, and they have things that you, I, and businesses in particular, find value in beyond just mere (computing) capacity, they call it the hybrid cloud. This is what sets them apart distinctively," Vleeschhouwer added.

For Microsoft, this year was labeled as "pivotal" by the CEO Satya Nadella, Vleeschhouwer commented on what he believes allowed for such a successful year from the tech titan.

"Several things, it was the ongoing growth of the cloud business, it was the demonstration that their Windows business, in total, increased which was something we had not anticipated," Vleeschhouwer said.

In terms of looking beyond this quarter's earnings report from Microsoft yesterday, the stock has been up 13% for the past year, but there have been some questions surrounding their LinkedIn (LNKD) acquisition, however Vleeschhouwer noted that this is no time to sell, and will continue to recommend the stock.

"Ultimately the main thing investors should look at would be cash flow, this is going to accelerate in spite of an impaired revenue number for the fiscal 16, they still had a good cash flow number, and we expect that it will grow even more over the next several years," Vleeschhouwer explained.

Separately, TheStreet Ratings rates Microsoft as a "Buy" with a ratings score of "B+." This is driven by several positive factors, which TheStreet Ratings believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks TheStreet Ratings covers.

The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. TheStreet Ratings feels its strengths outweigh the fact that the company has had sub par growth in net income.

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

You can view the full analysis from the report here: MSFT

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