Microsoft Downgraded to Hold by Melius and Stifel with Targets Cut to $430 and $392
Melius Research cut Microsoft’s rating from Buy to Hold with a $430 target, warning that higher AI-driven capex and pressure on its 365 business could harm free cash flow. Earlier, Stifel trimmed its price target from $540 to $392, citing Azure supply constraints and excessively optimistic 2027 forecasts.
1. Dual Analyst Downgrades
Microsoft was downgraded to Hold by both Melius Research and Stifel, with price targets cut to $430 and $392 respectively after both firms shifted from Buy ratings.
2. Melius Research Concerns
Melius Research flagged that escalating capital expenditures needed to compete in the AI sector and potential headwinds in the 365 subscription business could dent Microsoft’s free cash flow.
3. Stifel Forecast Reduction
Stifel reduced its price target from $540 to $392, highlighting supply constraints in the Azure cloud business and warning that Wall Street’s fiscal 2027 revenue and earnings estimates may be overly optimistic given rising AI competition.
4. Market Implications
These downgrades underscore growing concerns over Microsoft’s cost structure and long-term growth outlook, which may weigh on valuation multiples and investor sentiment in the near term.