Microsoft stock experienced a decline in early trading on Wednesday following an analyst’s decision to downgrade the shares from Buy to Neutral.
According to UBS analysts led by Karl Keirstead, growth in Microsoft’s cloud computing business, Azure, may be slowing at a faster rate than investors expect. They attribute this slowdown to a maturing market and a challenging economic environment. Additionally, the analysts predict that sales of Microsoft’s Office software products are likely to moderate this year as companies reduce their workforce.
As a result of these projections, UBS has lowered its price target for Microsoft stock from $300 to $250. However, they emphasized that they are not making a significantly negative call on the stock. Instead, they believe that the company’s valuation currently feels fair rather than cheap.
Similar to many technology companies, Microsoft faced challenges in 2022. The company’s shares declined by nearly 30%. Despite performing well during the work-from-home shift prompted by the pandemic, Microsoft was negatively impacted by rising interest rates, increased inflation, and the possibility of a recession in 2023. Consequently, in July and October, Microsoft announced job cuts in preparation for the coming fiscal year.
Shortly after the market opened, the shares dropped by 4.3% to $229.31.