Microsoft Falls Out Of The $3 Trillion Club After Logging Its Worst Month In Over A Decade – Analysts Are Still Bullish

MSFT was the worst-performing Mag7 stock in January.

• MSFT declined 11% in January.
• Performance comes amid a sharp sell-off after the company’s quarterly results last week, which showed slowing growth in its cloud unit.
• Microsoft Azure’s results would serve as benchmarks for peer cloud companies Amazon and Alphabet when they report earnings later this week.  

Microsoft’s stock slid 11% in January — its worst monthly decline in 11 years — dragging the company’s market capitalization below $3 trillion. 

Microsoft was the worst-performing stock in the Magnificent Seven group, followed by Apple, which declined 4.6%. Meta gained 8.6%, while Alphabet and Nvidia also ended the month in green.

The decline was largely due to the selloff last Thursday, following the company’s quarterly report, which pointed to slowing growth in its cloud unit. Sales at Azure grew 39% in the December quarter. Although they were higher than the analysts’ 38.8% growth estimate (Visible Alpha), the pace was a notch lower than the 40% growth in the just preceding quarter.

For hyperscalers like Microsoft, their cloud performance is critical, acting as a key barometer of returns on massive AI investments. Given investor reaction, the bar appears high for cloud peers, Alphabet and Amazon, which report their quarterly earnings on Wednesday and Thursday, respectively.

Retail Investor, Analyst Sentiment Strongly Optimistic 

That said, the move boosted sentiment among analysts and retail investors alike.

Phillip Securities upgraded its rating on MSFT to ‘Buy’ from ‘Accumulate,’ with an unchanged $540 price target, citing the more attractive valuation and still healthy Azure projections, according to the investor note summary on The Fly.

On Stocktwits, retail sentiment for MSFT has held firmly in the ‘extremely bullish’ zone since the company's results. “$MSFT Buy the dip. Msft better than gold,” remarked one user, with several others posting about buying or doubling down on the stock last week.

Currently, 56 of the 57 analysts covering the stock recommend 'Buy' or higher, with the lone analyst recommending 'Hold,' according to Koyfin. Their average price target of $599.58 is about 40% higher than the stock’s last close.

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