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Guggenheim analysts downgraded Microsoft (NASDAQ:MSFT) to Sell from Neutral, sending shares over 1% lower in pre-market Tuesday.
“We don’t necessarily expect MSFT to miss numbers, but they may disappoint investors nevertheless for both F2Q23 and guidance for the year… While most investors see MSFT as a large stable business that can weather any storm, it does have vulnerabilities, some of which could be exacerbated by this macro slowdown,” they wrote in a client note.
The analysts also made a number of rating changes in the broker’s software research coverage. They note that “Security is now showing cracks” as well after holding up really well. Overall, the analysts believe valuations have more room to correct lower
In addition to Microsoft, the analysts also downgraded Cloudflare (NYSE:NET) and Workday Inc (NASDAQ:WDAY) to Sell from Neutral, and Palo Alto Networks Inc (NASDAQ:PANW), Splunk (NASDAQ:SPLK) , and Zscaler Inc (NASDAQ:ZS) to Neutral from Buy.
“We remind investors that there are valid reasons why Software traditionally trades at a premium to other sectors and the broader market, and we expect this to continue. However, even good companies (and we believe all of the companies in our coverage universe can be at least described as such) can trade at levels above where they should be at times,” the analysts concluded.
