“We maintain our Neutral investment rating on shares of Microsoft,” Stephen Turner reports for Hilliard Lyons via Barron’s.
“We have a suitability rating of 2 [‘A historically secure company which could be cyclical, has a shorter history than a ‘1’ or is subject to event-driven setbacks’] based on the company’s declining free-cash-flow generation which has negatively affected our discounted cash flow (DCF) model fair-value target,” Turner reports. “We believe significantly higher share prices in the near term are only currently achievable if management can reduce the company’s expenses, divest certain businesses, and continue to repurchase shares and boost the dividend.”
“We continue to advise investor caution on shares of Microsoft,” Turner reports. “In our opinion, significant risks remain going forward as the consumer PC market shifts to mobile devices; Office transitions to a subscription service; hardware sales negatively affect gross margins; the integration of a potentially declining Nokia [devices and services] business; and as Satya Nadella, the new chief executive of Microsoft, steers the company in a mobile-first, services-first direction.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]