Microsoft: With A Valuation Cheaper Than IBM, Jefferies Says Buy

In a research note today, Jefferies & Co. analyst Katherine Egbert offers some interesting reasons to look at Microsoft (MSFT) stock.

• The Apple (AAPL) iPad has generated some $2 billion in sales since its April launch, yet Microsoft has lost $50 billion in market cap since the device came on the market.
• Microsoft shares now fetch a lower valuation than IBM (IBM), but Microsoft is still growing faster with expected 2011 revenue and earnings growth of 7.5% and 10.6%, respectively, versus 4% and 9.2% for IBM.
• Egbert concedes that the iPad will likely steal sales from Windows devices, but she notes that with Windows tablets on the way, the market may be exaggerating the threat.

Egbert has a $36 price target, which is based on a current market multiple (12.6 times) on Jefferies’ calendar 2011 estimate. (The target also includes Microsoft’s roughly $5 per share in cash.)

Shares of Microsoft are up nine cents today to $24.39.