Goldman Sachs has upgraded Microsoft’s stock to “neutral” from “sell.” In the report published by Goldman Sachs, they explained their reasoning behind their admittance of fault. You can read a short excerpt from the report below.
“We upgrade MSFT to Neutral from Sell. Since its addition to the Sell list on 4/11/2013, MSFT is +84% vs. the S&P +29%. Despite out year estimates consistently compressing, we failed to appreciate that the stock would disconnect from downward EPS revisions, and the significant upward re-rating of the multiple driven by MSFT’s transition to the cloud (Office 365 and Azure). We were wrong. On average, out year consensus EPS estimates have declined 11% in FY15 and 13% in FY16 from one year before the beginning of the FY, yet during that time MSFT’s NTM P/E multiple has increased from 10x to 20x.”
“We are increasing our out year non-GAAP EPS estimates, driven primarily by faster gross margin expansion in Office 365 and Azure. While we still believe EPS consensus for FY17 and FY18 are too high, given the ongoing successful transition to the cloud we do not see the multiple coming under pressure. As such, we believe a Neutral rating is more appropriate.”
When Goldman Sachs evaluates a company’s stock, they give it a rating to provide potential investors an insight into how the stock will perform. They currently have three ratings for stocks: Buy, Neutral, and Sell. “Buy” is of course the highest rating a company can earn, while “sell” is the worst. When a company earns a “Neutral” rating, Goldman Sachs believes the company’s stock can go either way along the spectrum.
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Source: Microsoft News
Jonathan was a regular ICXM contributor between 2015–2017, publishing 57 articles across opinion pieces, game reviews, Windows and PC, and Xbox news. Their work focused on hands-on reviews, platform commentary, and breaking-news reporting during the Xbox One X launch year and Microsoft’s wider Play Anywhere / UWP gaming initiative. They post on X as @jtainsworth13.