MSFT offers a unique combination of near term catalysts, medium term drivers and underappreciated assets, in our
view, which should collectively drive better-than-market earnings growth and upside to forecasts over the next 12 months.
Microsoft is entering a multi-quarter period of cyclical, product cycle and secular strength, which should fuel accelerating
growth, upside to forecasts and outperformance in the stock. While Microsoft will likely spend to plan in the June 2010 fiscal
year, firm cost controls in F2011 should enable us to nudge up our C2011 EPS forecasts. At 12 times our C2011 EPS estimate,
we argue that the stock is not capturing the cyclical improvement, product cycle momentum and emerging secular
tailwinds in search, social and cloud based computing, offering potential outperformance through growth and multiple expansion.
We remain buyers with a $38 price target.
Microsoft23
Investment Perspectives — US and the Americas5
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