Microsoft [Nasdaq: MSFT] stock went up a bit Friday. 4.1% by midday, if you were keeping track. Which, statistically, most of us weren’t. An analyst at UBS, Karl Kierstead, lowered his price target, then said it was still a buy. So it goes.
He thinks it’ll be worth $600 in a year. A 28% profit, he says. Assuming the world doesn’t end, of course. Or that we all suddenly decide money is worthless. Which, honestly, wouldn’t be the worst thing.
Why UBS Feels Kindly Towards Microsoft
UBS visited a data center in Wisconsin. It was going well, apparently. They’re building these things for artificial intelligence, which is either going to save us all or replace us with slightly more efficient robots. Kierstead thinks this will help Microsoft’s Azure grow. They raised their revenue predictions for a time that feels a long way off. It’s a strategy, I suppose.
Microsoft’s “Intelligent Cloud” business is second-largest. It makes a profit of 42%. Not as good as their “Productivity and Business Processes” segment, which clocks in at 58%. But 42% is still a number. A perfectly respectable number, really. A number that keeps the gears turning. So it goes.
Is Microsoft a Buy? That’s the Question, Isn’t It?
Kierstead is worried about the “de-rating” of software stocks. Investors are getting cautious about paying too much for AI. Which is sensible, when you think about it. We’re all just guessing, really. Throwing money at the future and hoping something sticks.
I’m concerned, too.
They predict 14% long-term earnings growth. Not bad. But the stock trades at 32 times earnings. That seems… optimistic. And they’re spending a lot of money. So much money, in fact, that it’s eating into their free cash flow. Currently, only 74% of their reported net income is actually, you know, cash.
At 43 times free cash flow, Microsoft looks expensive. Very expensive. Like a slightly gilded cage. So it goes.
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2026-01-23 21:13