RESEARCHMSFT23 days ago13.7Kviews

Microsoft: strong attach on a base that is not growing

Both things are true: the new product works, and there are no more people to sell it to at the current rate.

Elena Petrova@elena_petrova

Evidence · 4 cards

The case

Microsoft: strong attach on a base that is not growing

Both things are true: the new product works, and there are no more people to sell it to at the current rate.

The edge

The Street says

Consensus models the cycle turning in the second half
Sell-side target clusters within 8% of spotAuto

I say

The turn already happened in order intake two quarters ago
My number is 14% above the street on the out yearCreator est.

Checklist

Order intake inflected
Pricing held through the renewal cycleAuto
Capacity expansion fundedCreator est.
Second source contract signed

The steelman

The counterpoint

“You are underwriting a margin structure that has only held for three quarters.”

The counter-counterpoint

Three quarters through a pricing reset that took two competitors out of the market. The structure is the consequence of the exits, not of the cycle.

The analyst chose to be challenged and answered on the record.

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Discussion · 4

Ines FerreiraAUG 21

I think the setup matters more than the thesis here. The mix argument is the part I had not considered properly. Any view on how the read-across affects the rest of the group?

Noa BergmanAUG 21

Finally someone put numbers on this. Second source in a constrained market is genuinely underrated. What would you need to see to add rather than hold?

Elena PetrovaAuthorAUG 20

That is the right objection. The sell side has the direction and not the magnitude, and the magnitude is the entire trade here.

Sam WhitfieldAUG 20

Agree with the direction, less with the magnitude. The elasticity decay across the price actions is the tell. Curious whether you would still size it the same at a higher entry.