Several analysts have lowered their price targets on Microsoft (MSFT) stock, citing growing concerns about software sector valuation compression.
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Analysts at Cantor Fitzgerald reiterated a Buy-equivalent overweight rating on MSFT stock but reduced their price target on the shares to $590 from $639. Swiss bank UBS (UBS) cut its target on MSFT stock to $600 from $650, while maintaining a Buy rating.
Both Cantor Fitzgerald and UBS expect another strong quarter from Microsoft when it reports its financial results on Jan. 28. However, the price target cuts reflect valuation concerns across the software space. The price target cuts come with MSFT stock down 7% so far this year.
AI’s Impact on Software
Microsoft isn’t alone in seeing its share price slump. Software stocks have been badly beaten down over the last six months as concerns rise about the impact of artificial intelligence (AI) on the sector and the future of the industry.
Cantor Fitzgerald stresses that stock price multiples are compressing in software and notes that Microsoft isn’t immune to those pressures. UBS has a similar view and says that Wall Street’s current expectations for the company’s capital expenditures are too high. “Given the evident de-rating across the software sector, we’re trimming our PT from $650 to $600,” wrote UBS.
However, not everyone is cutting their price targets on MSFT stock. Morgan Stanley (MS) reiterated an overweight rating and $650 price target on the shares.
Is MSFT Stock a Buy?
Microsoft’s stock has a consensus Strong Buy rating among 34 Wall Street analysts. That rating is based on 32 Buy and two Hold recommendations issued in the last three months. The average price target on MSFT stock of $626.14 implies 33.04% upside from current levels.
