Declining personal computer sales dented PC-exposed stocks like chipmakers AMD (AMD) and Intel (INTC), along with computer manufacturers Dell (DELL) and HP (HPQ). The current, Microsoft (MSFT) stock is at a cross.
Software giant Microsoft could be the “next shoe,” Jordan Klein, managing director of technology, media and telecoms trading at Mizuho Securities, said in a note to clients on Thursday. Three. “Posting much weaker AMD (warning) and PCs last week, I see an increasing earnings risk Microsoft faces in the coming quarters.”
Klein said soft PC sales will affect Microsoft’s Windows operating system business and perhaps Office productivity software. But continued strength in the company’s cloud businesses, such as Azure, could help offset PC weakness, he said.
Also Tuesday, Jefferies analyst Brent Thill downgraded Microsoft’s share price target to 275 from 300 but kept his buy rating unchanged.
Microsoft shares fell
“Microsoft is still a great franchise but we’re lowering our estimates due to increased PC and exchange rates and the weakening ability of SMBs (SMEs) to spill over into businesses,” Thill said in a statement. your notes to customers.
On the stock market today, Microsoft shares fell 1.7% to close at 225.41.
Late Thursday, AMD warned that its third-quarter sales missed its view on weak PC demand. AMD says its PC chip sales plummeted 40% year-over-year in the September quarter.
On Tuesday, market research firms Canalys, Gartner and IDC reported that worldwide PC shipments fell in the third quarter. Canalys put the annual unit reduction at 17.7%. Gartner estimates a drop of 19.5%. And IDC pegs the drop at 15%. Gartner says PC shipments have fallen for four straight quarters.
“This quarter’s results could mark a historic downturn in the PC market,” said Gartner analyst Mikako Kitagawa. “While supply chain disruptions have finally eased, high inventories have now become a major issue due to weak PC demand in both consumer and enterprise markets.”
PC sales forecast to drop
In a note to clients on Sunday, investment bank Cowen downgraded its PC sales forecast for this year and next. Cowen analysts expect PC sales to drop 22% this year and 6% next year. Previously, it forecast a 9% decline in 2022 and a 3% decline in 2023.
“Our fieldwork indicates that there is no improvement in PC demand, that PC ASP (average selling price) will decline starting in the fourth quarter of the calendar year,” Cowen analysts said. PC inventories are two months above pre-pandemic levels.
Weak PC demand and high inventories will remain the highlight for PC makers like Dell and HP until at least the second quarter of 2023, they said.
Shares of Microsoft have recently outperformed shares of PC makers and PC chip suppliers. But its Relative Strength Rating of 39 out of 99 is still poor.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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