Microsoft’s
opportunities with artificial intelligence are enough for an analyst at Guggenheim to upgrade his rating on the stock, but near-term uncertainties keep him from becoming bullish on the tech giant.
Guggenheim analyst John DiFucci upgraded shares of
Microsoft
(ticker: MSFT) to Neutral from Sell on Monday and removed his previous $232 price target on the stock. The company’s opportunities with AI are “too strong a force to contend with” and enough to keep this analyst from a bearish perspective, he wrote in a research note, but certain concerns of his remain.
“The Generative AI narrative is too positive a force to contend with, even though the troubling dynamics we thought might develop, did,” DiFucci said. “Windows has continued to struggle as it’s become obvious that an important driver of this business, PC shipments, will not benefit from resurging relevance of these devices and in hindsight, were a Covid beneficiary like Zoom and
DocuSign.
”
Microsoft
didn’t respond to a request for comment from Barron’s.
The pandemic did boost demand for personal computers as people worked and took classes from home. But the demand environment took a hit as Covid-19 restrictions lifted, impacting many computer and chip manufacturers.
Microsoft reported fiscal fourth-quarter revenue in its personal computing segment of $13.9 billion in July, a decrease of 4% from the prior year. However, signs of life in the PC market have given some glimmers of hope. A report from the market research firm IDC on Aug. 28 said that despite a pressured consumer driven by high inflation, PC shipments are estimated to grow 3.7% year over year in 2024.
DiFucci also still has some concerns about the company’s AI future.
“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,” he said.
Microsoft Chief Financial Officer Amy Hood said at the Goldman Sachs Communacopia & Technology Conference in San Francisco earlier this month that the company’s suite of generative artificial-intelligence tools will reach $10 billion in revenue faster than any other business in its history.
Shares of Microsoft were down 0.3% Monday. The stock has gained 32% this year.
Write to Angela Palumbo at [email protected]
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