In Microsoft’s most recent quarterly results, released in October, the company gave a weak forecast for Azure sales growth, and analysts have been lowering expectations. The consensus for 2023 adjusted earnings per share has declined 5.6% over the past three months, while the earnings outlook has dipped 3.7%, data compiled by Bloomberg shows.
“Fair, not cheap”
The stock is trading at 21.8 times estimated earnings, a slight discount from its 10-year average of 22. In UBS’s view, the valuation “looks fair, not cheap,” and it lowered its price target from $300 to $250. Dollars. The Nasdaq 100 Index has a multiple of 19.9.
Tech stocks came under heavy pressure last year as the Fed’s monetary policy tightening hit multiples. Now the growing threat of a recession highlights concerns about a slowdown in business spending.
Also on Wednesday, enterprise software company Salesforce said it would cut some 8,000 jobs and reduce its real estate footprint as its corporate clients have become more cautious with spending.
Microsoft and Salesforce are among the companies that have embraced remote work during the pandemic, prompting a boom in demand for personal computers and cloud applications such as collaboration software. But the pace of that expansion has proved impossible to sustain as economic growth has slowed.
Despite such concerns, Microsoft remains a consensus darling on Wall Street, with more than 90% of analysts followed by Bloomberg recommending buys on the stock, and none have a sell rating.
While analysts’ average price target has declined about 11% since the end of September, to around $293, it still implies an increase of nearly 30% from current levels.