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Analysts admit they were “dead wrong” to recommend Microsoft as Sell. Their prior price target was $232 per share, signaling a downside risk of over 35%.
“The Generative AI narrative is too positive a force to contend with, even though the troubling dynamics we thought might develop, did,” they said in a client note.
These “troubling dynamics” include Windows and the broader PC market facing challenges as it became clear that the surge in demand during the COVID-19 pandemic was not sustainable, the analysts wrote.
Moreover, PC shipments were initially boosted by remote work and learning trends, similar to the rise of platforms like Zoom (NASDAQ:ZM) and DocuSign (NASDAQ:DOCU). However, the sustained relevance of PCs has come into question. Microsoft’s cloud platform, Azure, has encountered difficulties attributed to several factors, including market maturity, macroeconomic conditions, and heightened competition from new entrants.
On the other hand, The Office business has seen incremental traction, driven by factors such as price increases implemented a year ago and the renewal of agreements made three years ago, which involved lower discount levels and thus resulted in higher prices.
“And like every other person on the planet, we’ve come to expect that the GenAI “narrative” will become more than just a story, though we still question how much monetization will be realized and over what timeframe,” analysts further noted.
Microsoft shares rose 0.3% today.
