Stocks will fall significantly due to their elevated valuation, according to Jefferies .
Bakhistorien. Microsoft shares (ticker: MSFT) have risen about 35% this year due to investor enthusiasm over the company's Azure cloud computing business and success in selling software subscriptions such as Office 365.
In April, the company reported better than expected financial result from the third quarter.
What's new. Jefferies Analyst On Tuesday, John DiFucci repeated his Microsoft stock underperformance, predicting weaker than expected profitability for his Azure cloud computing business – and comparing it unfavorably with
(AMZN) Amazon Web Services.
"Azure will probably never see the margin expected due to cultural and technical factors," wrote DiFucci. "We believe that Microsoft, the stock, is significantly overvalued."
The Microsoft stock was down 1.5% to $ 135.67 on Tuesday. The company did not immediately respond to a request for comment.
Read more: 60-second case for Microsoft as a strong dividend
Analyst said about one-third of the company's free cash flow growth over the past year was due to Microsoft's Windows operating system, which he foresees. is not likely to continue.
"We believe there is a significant risk that Azure margins will never achieve the AWS values [and that] Windows … outperformance is not sustainable," the analyst added.
Looking ahead. DiFucci increased its Microsoft price target to $ 90 from $ 80, representing a 34% downward trend to today's share price.
Corrections and Reinforcements
DiFucci increased its price target on Microsoft stock to $ 90 from $ 80. An earlier version of this article was incorrectly reported that he had lowered his price target on the stock.
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