Two Dow Stocks Dinged by Downgrades

Microsoft stock just turned in its worst annual loss since 2008

Deputy Editor
Jan 4, 2023 at 9:39 AM
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The Dow is higher out of the gate this morning, but no thanks to Microsoft Corporation (NASDAQ:MSFT) and Honeywell International Inc (NASDAQ:HON). The two blue-chippers are slumping this morning after UBS dished out downgrades.

Microsoft's Azure and Office Could Be Risky

UBS downgraded Microsoft stock to "neutral" from "buy" and cut its price target to $250 from $300, citing concerns over the company's Azure and Office units, both of which boomed during the pandemic. The brokerage noted that Azure is entering "a steep growth deceleration" that could worsen, while Office 365 is vulnerable to a slowdown in 2023.

Last seen down 3.8% to trade at $230.42, Microsoft stock lost 28.7% in 2022, its first annual loss since 2011 and its largest yearly percentage loss since 2008. Call traders remain prevalent though, per the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.78 that ranks in the low 4th percentile of annual readings.

Honeywell Shares at a Premium

UBS wasn't done though, downgrading HON to "sell" from "buy," and slashing its price target to $193 from $220. The brokerage noted Honeywell stock is at a premium right now and an order slowdown is all but inevitable.

HON is 2.3% lower to trade at $209.20 at last check. The shares managed a 2.8% gain in 2022 -- not bad given the state of the stock market -- but far below hefty double-digit gains seen in 2019 and 2020. Puts are quite popular. According to HON's Schaeffer's SOIR of 1.28 that ranks in the 99th percentile of annual reading, short-term options traders favor bearish bets.

Options are certainly an intriguing route. The equity's Schaeffer's Volatility Scorecard (SVS) stands at an elevated 76 out of 100, meaning Honeywell stock has exceeded options traders' volatility expectations during the past 12 months.


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