Microsoft (MSFT) Stock Lower Today on Analyst Action

NEW YORK (TheStreet) -- Shares of Microsoft (MSFT) are sinking, lower by 2.79% to $45.37 on heavy trading volume Tuesday afternoon, following a ratings cut by analysts at Bank of America/Merrill Lynch earlier today to "underperform" from "neutral" with a $47 price target.

Analysts at the firm cited a slowdown in the Win Pro cycle, longer expected time to transition to Consumer Office 365, and difficulties in achieving a margin upside.

BofA/Merrill Lynch analysts added that if Microsoft initiates a $30 billion share repurchase program while reducing operational expenditure by $4 billion, there would be less room left for growth in earnings.

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About 33.89 million shares of Microsoft traded hands as of 3:47 p.m. Tuesday, compared to its average trading volume of about 27.84 million shares a day.

Separately, TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, MSFT's share price has jumped by 25.41%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 27.3%. Since the same quarter one year prior, revenues rose by 25.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although MSFT's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. To add to this, MSFT has a quick ratio of 2.28, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has slightly increased to $8,354.00 million or 1.81% when compared to the same quarter last year. Despite an increase in cash flow, MICROSOFT CORP's cash flow growth rate is still lower than the industry average growth rate of 11.86%.
  • You can view the full analysis from the report here: MSFT Ratings Report

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