On Thursday, Wedbush Securities adjusted its outlook on Microsoft Corporation (NASDAQ:MSFT), citing recent economic challenges as the primary reason. The firm's analyst has reduced the price target on Microsoft stock to $475 from the previous $550 while maintaining an Outperform rating on the shares. According to InvestingPro data, Microsoft currently trades at $390.49, with analyst targets ranging from $415 to $650, reflecting the market's mixed sentiment on this $2.9 trillion tech giant.
The revision follows a period of economic uncertainty, which has been dubbed an "economic Twilight Zone" by the analyst, triggered by the introduction and subsequent 90-day pause of new tariffs by the Trump administration. The decision to pause the tariffs came amid pressures from the bond market and a rising 10-year yield, which are believed to have influenced the administration's policy change. Despite these challenges, InvestingPro data shows Microsoft maintaining strong fundamentals with a 15% revenue growth and an impressive 69.4% gross profit margin.
This economic backdrop has negatively impacted the corporate spending outlook, leading to a reassessment of Microsoft's financial projections. As a result, Wedbush has adjusted its estimates for Microsoft's performance for June and the year 2026.
The analyst noted that the tariff developments and bond market dynamics have "created real damage to the corporate spending mentality." This sentiment is reflected in the lowered expectations for Microsoft's future earnings, prompting the adjustment of the price target to $475.
Despite the reduction in the price target, Wedbush continues to see Microsoft in a favorable light with an Outperform rating. This suggests that the firm still has confidence in Microsoft's long-term prospects, even as it acknowledges the near-term economic headwinds facing the company.
In other recent news, KeyBanc Capital Markets maintained its Overweight rating on Microsoft, setting a price target of $575. Analysts at KeyBanc highlighted Microsoft's flexibility in capital expenditure, particularly regarding data center investments. They noted the company's significant focus on artificial intelligence, which is expected to drive future growth. Cantor Fitzgerald also reiterated an Overweight rating on Microsoft, emphasizing the robust performance of its Azure cloud services and strong demand for AI capabilities. Analysts observed that Microsoft's strategic bundling of solutions adds value for customers, especially in the context of its AI-focused initiatives.
In other developments, Tesla (NASDAQ:TSLA) and Nvidia (NASDAQ:NVDA) led premarket gains among the Magnificent Seven stocks, with Tesla increasing by 2.7% and Nvidia rising by 3.1%. This movement comes as the group anticipates a rebound. However, Tesla and Nvidia also experienced premarket losses at another point, with Tesla down by 2.8% and Nvidia by 2.7%, indicating a temporary pause following a significant market rally. Meanwhile, OpenAI introduced the Evals API, a new tool designed to streamline workflow integration for users, enhancing the efficiency of AI applications.
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