Microsoft Downgrade: High Multiple Limits Upside Potential
The author of this article has been a long-time owner of Microsoft Corporation (MSFT) and had previously bought into its dip at the beginning of the year. The stock price recovered by over 20% after that, leaving investors wondering if it's still a good buy.
According to the author, competition in the cloud remains intense, with AWS and Google Cloud posting larger-scale or faster segment growth, challenging Azure's struggle for leadership. Despite being happy with MSFT's results, particularly on the cash flow front, which shows strong free cash flow despite growing CapEx, the author believes that its high multiple limits its upside potential.
The author downgraded their rating for MSFT due to this concern and thinks it is one of the few hyperscalers that trades at the highest multiple. The author's positive opinion on other hyperscalers such as META (Meta Platforms), GOOG (Alphabet Inc.), and AMZN (Amazon.com, Inc.) is also mentioned.