© Reuters. Microsoft (MSFT) No More Sell Ratings as Guggenheim Updates and Admits to Being ‘Completely Wrong’
Guggenheim analysts upgraded shares of Microsoft (NASDAQ to Neutral from Sell. Therefore, there are no longer sell-side analysts rating Microsoft with a Sell rating or equivalent.
Analysts admit they were “completely wrong” in recommending Microsoft as a Sell. Its previous price target was $232 per share, indicating a downside risk of more than 35%.
“The generative ai narrative is too positive a force to contend with, even though the worrying dynamics we thought might play out did,” they said in a client note.
These “concerning dynamics” include Windows and the broader PC market facing challenges when it became clear that the surge in demand during the COVID-19 pandemic was not sustainable, the analysts wrote.
Additionally, PC shipments were initially boosted by remote learning and work trends, similar to the rise of platforms such as Zoom (NASDAQ and DocuSign (NASDAQ ). However, the sustained relevance of PCs has remained in question. Microsoft’s cloud platform, Azure, has encountered difficulties attributed to several factors, including market maturity, macroeconomic conditions, and increased competition from new entrants.
On the other hand, the Office business has experienced incremental traction, driven by factors such as price increases implemented a year ago and the renewal of agreements made three years ago, which implied lower levels of discount and, therefore, resulted in higher prices.
“And like everyone else on the planet, we have come to expect the GenAI ‘narrative’ to become more than just a story, although we still wonder how much monetization will be achieved and in what timeframe,” the analysts further noted.
Microsoft shares rose 0.3% today.
