Guggenheim analysts John DiFucci has revised his rating on Microsoft (NASDAQ:MSFT) to 'Neutral' from 'Sell', and removed his previous price target of $232 on Monday. Despite acknowledging the potential of artificial intelligence (AI) in Microsoft's future, DiFucci remains circumspect due to ongoing uncertainties.
DiFucci expressed apprehension around Microsoft's Windows business, which continues to face challenges as PC shipments, a key driver for the business, have not seen the anticipated resurgence. The pandemic initially spurred demand for personal computers, but the relaxation of Covid-19 restrictions has dampened the demand environment, impacting computer and chip manufacturers.
In July, Microsoft reported a 4% year-over-year decrease in its fiscal fourth-quarter revenue from its personal computing segment, amounting to $13.9 billion. However, a report by market research firm IDC published on Aug. 28 indicates potential recovery in the PC market, estimating a 3.7% year-over-year growth in PC shipments in 2024 despite high inflation.
While DiFucci recognizes Microsoft's AI potential and expects the Generative AI narrative to evolve, he questions the extent and timeframe of potential monetization. This skepticism persists despite Microsoft’s Chief Financial Officer Amy Hood's announcement at the Goldman Sachs Communacopia & Technology Conference in San Francisco earlier this month. Hood projected that their suite of generative AI tools would reach $10 billion in revenue faster than any other business in their company history.
Microsoft shares were down by 0.2% in premarket trading on Monday, but the stock has seen an appreciation of 32% this year.
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