(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Analysts are growing more bullish on Microsoft Corp. (MSFT), upping their price targets and estimates for the company for this coming quarter and the full year. The company reported blow-out fiscal third-quarter results on April 26. (For more, see also: Apple, Microsoft Will Drive 2018 Tech Earnings: Moody's.)

The stock is already up over 11% in 2018, far better than the S&P 500 decline of about 40 bps. Even over the past year, the software giant has crushed the broader S&P 500 climbing by over 38%, to the S&P's rise of only 11.5%. 

MSFT Chart

MSFT data by YCharts

Rising Estimates

Microsoft reported fiscal third-quarter results that easily topped forecasts on the top and bottom line. Earnings came in nearly 12% higher than estimates at $0.95 per share, while revenue beat estimates by 4% coming in $26.82 billion. The big beat led to analysts upping their forecast for the fiscal fourth, with revenue estimates up by over 4% to $29.22 billion resulting in growth over 18% from a year ago. Meanwhile, earnings' estimates have been upped by 8% to $1.08 per share and are now forecast to grow by 10% from a year ago. (For more, see also: Microsoft Stock Has the Growth Institutions Want.)

Full-year estimates have been raised too, with revenue estimates climbing by 2% and earnings rising by 5.3% over the past few weeks. Revenue is now seen growing by 13.3% to $109.51 billion in fiscal 2018, and profits are seen rising by nearly 16% to $3.84.

MSFT EPS Estimates for Current Fiscal Year Chart

MSFT EPS Estimates for Current Fiscal Year data by YCharts

Price Targets Rising

The price targets on the stock have also been climbing, with an average analyst price target moving up by about 4% to $110.31, nearly 16% higher than the current stock price around $95. Additionally, 84% of the 37 analysts covering the stock rate it a "buy" or "outperform," up from 81% before results. 

MSFT Price Target Chart

MSFT Price Target data by YCharts

Not Cheap

Microsoft is still not cheap, trading at 23.5 times fiscal 2019 earnings estimates of $4.03, especially when adjusted for its estimated 2019 growth rate of only 5%, giving it a PEG ratio of 4.72. Additionally, shares of the stock are trading at their highest one-year forward P/E ratio in three years. Over that period, the average ratio was about 17.9, with a standard deviation of approximately 2.9, and a range of about 15 to 21. 

Fundamental Chart Chart

Fundamental Chart data by YCharts

For now, analysts are undeterred, and as bullish as ever when it comes to Microsoft. Who can blame them given the big beat. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the founder of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of two to three years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.

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