The firm gave an update on its stance in light of Gartner's recent PC preliminary data which showed worldwide first-quarter PC unit shipments decline 1.7% year over year and 7.6% quarter to quarter.
Though PC shipments continue to fall, Credit Suisse notes that the March quarter was the slowest quarter-to-quarter decline of the past eight March quarters. It was also the lowest year-over-year fall in eight consecutive quarter.
"The U.S. market, which is Windows' highest ASP geography with the lowest levels of piracy, showed the fourth consecutive quarter of shipment growth, which suggests the U.S. has passed the worst stages of the decline in shipments after having been the first region to be significantly impacted by the growth in tablets," wrote analyst Philip Winslow in the report.
Credit Suisse said it expects Microsoft to return to double-digit EPS growth and that a number of near-term options exist for the company to offer shareholder value.
According to Winslow, options include: "(1) rationalizing the cost structure of the company, (2) potentially divesting/exiting underperforming/non-core businesses, (3) optimizing the capital structure (e.g., raising debt against off-shore stockpiles of cash), (4) increasing the level of buybacks/dividends, and/or (5) accelerating the shift to Office 365 (i.e., "pull a full Adobe")."
The firm said these changes could potentially push price targets into the high-$40s.
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Separately, TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MSFT's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although MSFT's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.96, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Software industry and the overall market, MICROSOFT CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 43.59% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: MSFT Ratings Report