Microsoft Corporation (MSFT)
Downgrade:
Microsoft has recently been downgraded by D.A. Davidson & Co (Analyst Rank #39), moving to a “Neutral” from a “Buy:” rating. The 12 month target forecast was maintained at $475 per share.
Davidson Analyst, Gil Luria’s fundamental basis for the downgrade on the company, is he believes Microsoft is losing the competitive edge in cloud computing, against Amazon Web Services (AWS) and Google Cloud also gaining ground. Luria points out that Microsoft is also lagging in deploying custom silicon in data centers, making it reliant on NVIDIA, which could shift wealth from Microsoft shareholders to NVIDIA’s. He forecasts a decline in Microsoft’s operating margins as the company increases capital expenditures for data centers, suggesting it may need to lay off around 10,000 employees annually to maintain margins. Luria warns that the current return on investment for Microsoft’s cloud services may not be sustainable due to declining GPU prices and reliance on high-rate long-term deals.
Stock Forecast
Based on forecasts from 28 analysts, the average target price for Microsoft Corporation is set at USD 500.61 over the next 12 months, indicating a potential upside from its current trading level of USD 435.27. This suggests a bullish outlook for the tech giant, reflected in the consensus rating of “Strong Buy” among analysts.
Stock Target Advisor’s analysis rates Microsoft as “Slightly Bullish,” supported by 10 positive signals and 5 negative signals. This balanced view indicates that while there are some concerns, the overall sentiment remains optimistic regarding Microsoft’s performance and growth prospects.
Over the past week, Microsoft’s stock has appreciated by 1.09%, while it has gained 4.75% in the past month. Impressively, over the last year, the stock has surged by 37.30%, showcasing robust growth that aligns with the company’s strong fundamentals and strategic initiatives in cloud computing, AI, and software development.
Final Analysis
While Microsoft faces challenges in maintaining its competitive edge, particularly in the cloud sector, the overall market sentiment remains positive. The combination of strategic investments and a robust growth trajectory positions Microsoft well for future success, despite potential short-term headwinds.
Analysts forecast an average target price of USD 500.61 for Microsoft Corporation over the next 12 months, suggesting potential upside from its current price of USD 435.27. This bullish outlook is reinforced by a consensus rating of “Strong Buy.” Additionally, Stock Target Advisor adds to the positive perspective as it rates Microsoft as “Slightly Bullish,” based on 10 positive signals and 5 negative signals, indicating an overall optimistic sentiment regarding the company’s performance and growth prospects, despite some concerns noted.
