NEW YORK (TheStreet) -- Shares of Microsoft Corp. (MSFT) are declining 0.41% to $45.72 after Jefferies reduced its 2016 earnings estimates to $1.94 per share from $1.96, with 2017 earnings estimates lowered to $2.47 from $2.49 per share.
The firm maintained its "underperform" rating and a price target of $38 on the stock.
PC industry revenues are expected to stay flat, implying more lower-end PCs and lower ASPs (Active Server Pages) for Microsoft, Jefferies noted.
"We continue to see downside risks to PC forecasts and expect the PC market to stay 'lower for longer'," Jefferies analysts said.
Additionally, Microsoft believed that Windows 10 revenue will be deferred and recognized over a period of time; however, the firm does not see the underlying economics of Windows have changed and believes that PC market is still challenged, Jefferies added.
Microsoft is engaged in developing, licensing and supporting a range of software, hardware and online advertising products and services.
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 revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 6.5%. 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.
- Despite currently having a low debt-to-equity ratio of 0.35, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.65 is very high and demonstrates very strong liquidity.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The gross profit margin for MICROSOFT CORP is currently very high, coming in at 74.02%. Regardless of MSFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MSFT's net profit margin of 22.94% compares favorably to the industry average.
- You can view the full analysis from the report here: MSFT Ratings Report