UBS analysts said Microsoft’s recent share-price pullback has already absorbed part of the risk tied to its fiscal fourth-quarter results, leaving relatively limited downside from current levels. Even so, the bank lowered its price target on Microsoft (MSFT) to $480 from $510 while maintaining a Buy rating. UBS said the change reflects concern that Microsoft may raise its capital expenditure outlook while only holding, rather than lifting, its Azure growth guidance. In the bank’s view, that mix of heavier spending and only modest revenue-growth expectations may not be well received by the market. Beyond debate around capex and returns on investment, UBS also flagged several areas of pressure heading into the report, including Microsoft’s exposure to OpenAI, replacement risk from open-source models, and questions surrounding its flagship productivity software business. The analysts said they still rate the stock Buy, but now approach the earnings release with a more balanced stance.
UBS analysts said on July 28 that Microsoft’s recent share-price pullback has already taken some of the risk out of its fiscal fourth-quarter earnings setup, leaving relatively limited downside for the stock.
UBS kept its Buy rating on Microsoft (MSFT) but cut its price target to $480 from $510. The bank said Microsoft could raise its capital expenditure outlook while keeping Azure growth guidance unchanged rather than increasing it, a combination UBS suggested may not be favored by the market because it points to higher spending alongside limited revenue-growth expectations.
Capex, Azure guidance and other pressure points
Beyond discussion around capital spending and return on investment, UBS said Microsoft could face pressure on several fronts heading into the report. Those include the company’s exposure to OpenAI, potential replacement risk from open-source models, and scrutiny around its flagship productivity software business.
The analysts wrote, “Overall, we maintain our Buy rating, but we are taking a more balanced view of this earnings report.”
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