Microsoft Estimates Lowered At Goldman Sachs On Potential Brexit Impact

Goldman Sachs’ Heather Bellini mentioned that while Brexit does not appear to have had a meaningful impact on Microsoft Corporation (NASDAQ: MSFT) during 4Q16, “there is concern that market uncertainty in the UK and Europe could have an impact on deal activity in F1H17.”

Bellini maintains a Neutral rating on the company, with a price target of $55.

F4Q Results

The company is scheduled to report its F4Q16 results on July 19.

The analyst expects Microsoft to report revenue of $21.8 billion, missing the consensus and coming in at the low end of the guidance.

The non-GAAP EPS is expected to be in-line with the consensus and the estimate, at $0.58.

“Last quarter MSFT reported weakness in transactional revenue for both S&T and commercial Office, which we believe we should continue to see in FQ4,” Bellini stated.

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The Brexit Impact

Following concerns regarding the uncertainty in the U.K. and Europe due to Brexit, the estimates have been lowered to reflect updated FX rates following the U.K. referendum.

For F4Q16, Bellini expects FX headwinds of 400 bps, higher than the guidance of 300 bps.

“We still view downside risk to FY17 and FY18 non-GAAP EPS estimates. However, we note that investors have not responded to EPS reductions during this shift to the cloud on a consistent basis,” the analyst added.

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