Normally, analysts do not downgrade tech giant Microsoft (MSFT) stock. Microsoft tends to be an attractive proposition, thanks to its remarkable diversity and primacy in multiple sectors. But a downgrade happened indeed, as Stifel analysts pivoted on Microsoft. The news hit investors hard, and Microsoft shares slid nearly 3% in Thursday afternoon’s trading.
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Stifel, via analyst Brad Reback—who has nearly a five-star rating on TipRanks—noted that the consensus estimates for Microsoft’s 2027 are “too optimistic.” In fact, Reback cut his price target from $540 per share to $392 per share, now the lowest price target on Wall Street, reports note. Further, Reback cut the rating from its previous Buy to merely Hold.
Reback pointed to the massive spending that Microsoft is engaging in for artificial intelligence development, as well as the slowing pace of growth in Azure for Microsoft. Reback further noted, “We see no near-term catalysts and expect the stock to be range-bound until either capex growth slows below Azure growth and/or Azure posts a significant acceleration.”
A Pivot at Obsidian
Obsidian is commonly compared to Bethesda, and not just because Obsidian actually worked on one of Bethesda’s biggest franchise titles with the production of Fallout: New Vegas. But there are signs that Obsidian—now a part of Microsoft—is working to redefine what it is in the face of a gaming market in clear upheaval.
Reports note that Obsidian is eager to become more productive overall, putting out more games with smaller budgets, and reusing some of its technology in a bid to pare back development times. It also means to space out releases. This is actually perhaps the best plan; Obsidian’s last three releases were not disasters, but two of them missed Microsoft’s admittedly rather optimistic sales forecasts. Obsidian wants to make sure no game takes more than four years to go from initial concept to release. This is a natural response for a studio that has been on the brink of collapse at least once before.
Is Microsoft a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 34 Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 0.39% loss in its share price over the past year, the average MSFT price target of $598.49 per share implies 49.09% upside potential.
