January 5, 2023
Microsoft’s stocks have underperformed in comparison with its big tech peers on U.S. exchanges, with its shares falling 5.3% after UBS analysts declared that the software company faces weakness, particularly in the cloud. UBS downgraded the company due to concerns about slowing growth in its cloud services and Office suite.
UBS downgraded the stock from “buy” to “neutral” and reduced the price target by $50 to $250. According to Refinitiv data, this is less than the median of $290 and the average “buy” rating from more than 50 analysts.
According to Karl Keirstead, the lead analyst, Office 365, which has been a remarkably consistent machine recently, may see slower revenue growth in 2023, while Azure is entering a steep growth deceleration that may be worse in 2023 and 2024 than investors expect.
In 2022, it had lost 29% of its value, but outperformed Big Tech peers. While declining enterprise software spending from companies cutting costs and laying off employees may weigh on Microsoft’s Office 365 business this year, according to Keirstead.
Microsoft’s Azure cloud unit is entering a steep growth deceleration that could be worse than investors expect in FY23/FY24, according to lead analyst Karl Keirstead, who also believes the market has reached saturation.
The sources for this piece include an article in Reuters.
