NEW YORK (TheStreet) -- Shares of Microsoft (MSFT) are up 1.49% to $45.50 in pre-market trade as Pacific Crest Securities upgraded the software giant to "outperform" from "sector perform" with a $54 price target.
The firm cited increased clarity on the company's cloud strategy with its adoption of Azure and Office 365 for its ratings change.
The upgrade comes after Microsoft reported mixed fiscal fourth-quarter results late yesterday, with profit below estimates but with sales above expectations.
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 largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, solid stock price performance and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MSFT's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.01, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- MICROSOFT CORP's earnings per share declined by 5.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MICROSOFT CORP increased its bottom line by earning $2.60 versus $2.00 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $2.60).
- You can view the full analysis from the report here: MSFT Ratings Report