Citigroup analyst Walter Pritchard, who rates Microsoft shares "buy" with a $35 price target, notes that with Microsoft "entering the phone business in a major way," it will try to improve its market share in smartphones. Elop may help achieve this at Microsoft, but the smartphone and tablet market are becoming increasingly competitive, with margins being pressured for almost all, including to some extent, Apple. Any potential for Microsoft to focus on its enterprise business, which Pritchard calls "profit-driving," is now unlikely, as Microsoft doubles down on its devices strategy, with Elop presumably taking over the helm once Ballmer steps down.
Oppenheimer analyst Shaul Eyal, who rates shares "Outperform" with a $37 price target, notes that Microsoft "is placing a final bet on its mobile opportunity."
With shares sliding some 4% in early Tuesday trading, investors appear to be saying that this strategy by Microsoft, while relatively inexpensive for a company with over $77 billion in cash on its balance sheet, is the wrong one.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV