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CSFB Sees Microsoft Making Its Number

It ups the price target to $29.


(MSFT) - Get Microsoft Corporation (MSFT) Report

stock snapped out of its recent funk Friday after analysts said they doubted it would miss its upcoming earnings number.

Shares were up 34 cents, or 1.3%, at $26.09 in afternoon trading.

A five-analyst team at CSFB believes the company's revenue could reach $7.85 billion in the fiscal fourth quarter, in line with Wall Street's consensus and up from the group's previous estimate of $7.77 billion. CSFB raised the stock's 12-month price target to $29 from $27, although the firm kept its neutral rating unchanged and its earnings-per-share estimate at 23 cents a share.

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CSFB said that although the stock could reach $30 in the second half, "We continue to expect Microsoft to underperform. The company is likely to face significant erosion of monopoly pricing pressure over the next three years given desktop maturity and open source alternatives."

The CSFB analysts added: "The risk associated with open source software outweighs Microsoft's return potential from progress in the enterprise and other growth initiatives."

While the recent rally in tech has yielded hefty gains for most stocks in the sector, including a 19% rise for the Information Technology index, Microsoft shares are up a modest 0.8% for the year, thanks in part to today's gains.

CSFB noted that stronger growth in PC sales could lead to potential earnings upside in fiscal 2004. It also said the stock's underperformance in relation to its software peers leaves room for "catch up" in the near term. But on a longer-term basis, the company is not expected to reap as much benefit as its rivals from a recovery in the sector.

CSFB makes a market in the stock of Microsoft and has an investment banking relationship with the company.