Analyst Insights: Citi Lowers Microsoft (MSFT) Stock Price Target Before Earnings

Analyst Adjustments on Microsoft (MSFT) Ahead of Earnings

As Microsoft (NASDAQ: MSFT) approaches its earnings report, Citigroup has adjusted its twelve-month price target from $500 to $497, while keeping a 'Buy' rating.

Concerns arise over rising capital expenditures and slow growth in Azure, Microsoft's cloud computing division.

Capital Expenditure Concerns and Azure Performance

Microsoft's stock trades at $428.93, marking a 1.5% rise over the past five days. Yet, the broader tech sector has seen stronger growth.

Capital expenditures are projected to surge by 36% year-on-year to $55.7 billion in 2024, significantly impacting profitability.

• In FY2024 Q4, capital spending reached $19 billion, largely for AI and cloud enhancements.
• Microsoft faces increasing energy demands linked to AI services.

Concerns about short-term profitability are prevalent as the market considers the extensive costs required for future capabilities.

Analyst Evaluations and Market Sentiment

Despite Citigroup's lowered target, analysts from various firms remain optimistic about Microsoft. Loop Capital's Yun Kim reaffirmed a 'Buy' rating with expectations of a solid quarterly performance.

Analysts observe potential growth in Dynamics 365 and other segments as they continue to show robust revenue increases.

Overall, while short-term challenges persist due to increased capital expenses and underwhelming Azure performance, Microsoft's strategic investments in AI signal a promising long-term trajectory.