He raised his target to $335 from $310 on the stock and kept his buy rating for the software company.
Microsoft was at $288.70, down 0.33%, in premarket trading. It has jumped 26% in the past six months amid a strong financial performance.
“Microsoft been a significant outperformer year to date, up 30% vs the software index, setting the bar slightly higher for MSFT shares going into the” fiscal 2021 fourth-quarter earnings report, Thill said.
Expectations for the quarter ended June 30 “are achievable, supported by MSFT's diverse portfolio including Azure and Teams driving upselling,” he said.
“Key items to watch are fiscal 2022 margin pressure, elevated expectations and more color on recent merger acquisition and broader aspirations,” Thill added.
Potential areas of strength in the earnings report include commercial RPO [recovery point objectives] growth,” Windows OEM [original equipment manufacturer] and favorable seasonality, Thill said
Microsoft’s operating margins should “improve modestly over time, but will face headwinds for the next year or two, as MSFT invests in the business and laps pandemic-related savings,” he said.
Thill also sees Microsoft “successfully integrating with all its M&A.” And he sees “potential” for dividend and share repurchase increases.
Meanwhile, TheStreet's Jim Cramer explained last week why Salesforce’s (CRM) - Get salesforce.com, inc. Report planned takeover of Slack (WORK) - Get Slack Technologies, Inc. Class A Report will give Salesforce Chief Executive Marc Benioff the tools he needs to do battle with Microsoft.