Shares of Microsoft Corp. retreated from record levels on Thursday when an analyst downgraded the shares despite Wall Street’s general agreement that the software giant was well diversified to handle the challenges posed by COVID-19.
Microsoft MSFT,
Shares fell to an intraday low of $ 204.42 and last lost 3.4% to $ 204.62, compared to a 0.8% decline in the DJIA Dow Jones Industrial Average,
a 0.8% decrease in the S&P 500 SPX index,
and a 1.7% drop in the Nasdaq Composite Heavy Technology COMP Index,
On Wednesday night, Microsoft beat Wall Street profit estimates for the quarter to end its fiscal year with record quarterly revenue of $ 38 billion, and forecast revenue that was largely in line with or slightly above expectations for analysts.
Oppenheimer analyst Timothy Horan downgraded Microsoft’s “yield” rating to “outperform” on slowing sales growth and margin expansion as well as high stock prices. Microsoft shares closed at a record high of $ 214.32 on July 9, and were up approximately 31% so far this year, compared to a 1% gain in the S&P 500 and an 18% increase in the Nasdaq.
“Service companies often slow down the economy in about six months,” Horan said. “Major business failures and downsizing at the largest companies will affect MSFT’s revenue growth. The stock is trading at historically high multiples as it faces tough revenue compilations for the coming year. ”
Morgan Stanley analyst Keith Weiss, who has an overweight rating and a price target of $ 230, said Microsoft’s exposure to IT trends benefiting from the COVID-19 pandemic was “unmatched.”
“While not immune to the weaker macro, the increasing priority of digital transformation and a comprehensive suite of solutions enables Microsoft to maintain momentum in a difficult environment,” Weiss said.
Microsoft’s Azure cloud computing platform benefited not only from the work-from-home and shelter-in-place policies, but also the company’s gaming division, software-as-a-service products, the communication platform and team collaboration and the Dynamics 365 product line that directly competes with Salesforce.com Inc. CRM,
Mizuho analyst Gregg Moskowitz, who has a buy rating and a price target of $ 225, said Microsoft’s Azure business is positioned to “increase success in the cloud,” given the “economic pressures associated with COVID “and a stark comparison of 22% growth for the year. Makes a quarter.
“In summary, we are not concerned with Azure’s slightly slower revenue slowdown this quarter,” Moskowitz said. “Rather, we continue to believe that Azure will become increasingly powerful.”
Jefferies analyst Brent Thill, who rates Microsoft as a buyout and has a price target of $ 240, said the company “remains a software pillar” despite the “noisy quarter.” Thill also defended the slowdown in Azure growth.
“The moderation in growth was due to industries affected by COVID, customers who were optimizing their spending, and some delayed decisions,” Thill said.
Of the 33 analysts Microsoft covers, 29 have buy or overweight ratings and four have retention ratings. Of the 18, their stock price targets increased, while one lowered theirs, resulting in an average price target of $ 227.59, according to FactSet data.
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