Analysts Adjust Microsoft Price Targets After Revenue Miss

The company cited a stronger U.S. dollar for the revenue miss

Deputy Editor
Jan 31, 2019 at 10:28 AM
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The shares of Microsoft Corporation (NASDAQ:MSFT) are down 2.3% at $103.92 -- dragging on the Dow -- after the company reported fiscal second-quarter revenue below analysts' expectations. The company cited a strengthening U.S. dollar, slowing Azure revenue growth, and a personal computing segment revenue miss for the disappointing number, though the tech icon did report an adjusted profit beat.

MSFT rallied hard off its seven-month low of $93.96 from Dec. 26, but the upside was neatly contained by its 120-day moving average. Today's drop puts the shares at risk of falling beneath a trendline connecting higher lows since late December, especially if analysts continue to issue bear notes.

Several analysts have already swarmed the stock. Nomura cut its price target to $113 from $115; Independent Research slashed its target price to $82 from $115, and maintained its "sell" rating; and Barclays cut its target price to $120 from $121. Nevertheless, all three estimates still stand above current levels. What's more, the consensus 12-month target price of $125.91 represents a 21.2% premium to current levels, and 18 of the 20 analysts following the stock consider it a "strong buy."

Options traders were bullish ahead of Microsoft's earnings report, too, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) indicating that MSFT's 10-day call/put volume ratio of 2.35 is in the 74th percentile of its annual range. This means calls have doubled puts in the past two weeks, and the rate of call buying has been much faster than usual.


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