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UPDATE: Bank of America Downgrades Microsoft On Potential Challenges New CEO Will Face


In a report published Monday, Bank of America Merrill Lynch analyst Kash Rangan downgraded Microsoft (NASDAQ: MSFT) from a Neutral rating to an Underperform rating and maintained a price target of $36.00.

In the report, Bank of America Merrill Lynch says "In our view, the substantial stock strength (+42% YTD vs. SP 500 +26%) driven by optimistic speculation around new CEO choice, possible emphasis on enterprise, divestiture of consumer businesses, and restructuring to drive $1 of EPS synergies above FY15 consensus EPS of $2.80 exposes investors to downside risks. Though not in consensus estimates, these synergies are widely anticipated by investors. The real issue amidst downward revisions, flat FY12-14 EPS, and declining margins is that regardless of CEO, investors must grapple with risk of undoing the “devices & services” strategy of an $80bn behemoth just when a major reorg has already been set in motion. On the other hand, trying to move quickly with the status quo strategy could burden the new CEO (while integrating Nokia) and disappoint investors. We see two stock scenarios in the near term in which we equally divide probability of CEO selection among 5 candidates (1 external and 4 internal)."

Microsoft closed on Friday at $37.84.

Latest Ratings for MSFT

Oct 2020Deutsche BankMaintainsBuy
Oct 2020Credit SuisseMaintainsOutperform
Oct 2020Morgan StanleyMaintainsOverweight

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Posted-In: Bank of America Merrill Lynch Kash RanganAnalyst Color Downgrades Analyst Ratings

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