Three Headwinds That Will Continue To Hurt Microsoft's Stock Going Forward

Software major Microsoft Corporation MSFT came out with its quarterly results on Monday after market closing. The company reported EPS of $0.71, compared to $0.78 it reported in the same quarter last year. Robert Breza from Sterne Agee was on CNBC recently to discuss Microsoft’s quarterly numbers.  

The Headwinds

“Well, I think there are three things really, the foreign currency is definitely going to create a hangover here effect for about the next three or four quarters,” Breza said. “We also have the XP upgrade cycle which ended last March, so we have got a anniversary of that for the next two quarters and then longer-term Microsoft is undergoing a transition of moving its transactional business which is about 35p of the total revenues to more of a subscription [readable] model and that’s also going to create a headwind. So, those three headwinds are kind of what’s going to hurt the stock here as analysts continue to reduce their estimates going forward.”

What Changed In The Last Two Years That Caused The Stock To Move Up?

“Well, I think two things; one is this XP upgrade cycle really occurs about every ten years,” Breza said. “So, that’s one thing and then the other thing was obviously the change in management and leadership, a much more focussed management caught up moving to where the puck is going to be in terms of moving to the cloud, moving to mobile and moving the model underneath it towards that readable subscription nature, which is going to help kind of take that multiple, it will in the short-term come down, but long-term should outpace over the last ten years.”