The cloud computing sector is showing a clear slowdown, while the PC sector has been a disaster for the past few months, two numbers that Microsoft management appears to have used to lower its expectations. (Photo: 123RF)
What to do with Microsoft, WSP and Electric Lion titles? Here are some recommendations from analysts that are likely to move prices soon. Note: the author may have a completely different opinion than the one expressed.
Microsoft (MSFT, $250.66): lower forecast
Microsoft’s management has lowered its revenue forecast by the end of 2024, which could change investors’ expectations as well as slow down the growth of its title, the company Wedbush estimates.
Analyst Daniel Ives notes that nothing has stuck with Microsoft lately despite the markets being down. If analysts were holding their breath to see if the US computer giant would hit these targets each quarter, it might.
However, that can change, he believes. Microsoft’s management has just downgraded its forecasts, both for the second quarter of 2023 and for the fiscal years 2023 and 2024. The revenue targets thus fall from USD 56.8 billion to USD 52.9 billion. USA for the second quarter, with overall growth therefore falling from 9.8% to 2.2%. For the year 2023, it is a decrease from USD 226 billion to USD 217.7 billion (growth decreasing from 14% to 9.8%). For 2024, revenue falls from $257 billion to $248.5 billion (revised growth of 13.7% to 14.8% due to expected lower revenue for 2023).
Daniel Ives points out that the cloud computing sector is showing a clear slowdown, while the PC sector has been a disaster in the last few months, two data that Microsoft’s management seems to have used to lower its expectations. What remains to be discovered now is whether this is just a tough time to pass or whether it is still a repositioning of the company to drive up the price of its title.
Wedbush believes that the cloud component as well as Office 365/Windows will take up more and more space while providing growth and better margins in 2023 and 2024 despite the looming recession. Daniel Ives added that he is confident that Microsoft is in a good position to weather this financial uncertainty and find itself in a better position after the storm thanks to its cost control strategies already in place.
Despite Wedbush leaning toward a reset of expectations rather than a longer-term cut cycle, it is lowering its target price from $320 to $290 to reflect its own lower estimates.
WSP (WSP, $161.29): Well positioned to weather the storm