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Sunday's Bonus Article
Microsoft Targets Trimmed: What It Means for InvestorsSubmitted by Chris Markoch. Article Published: 4/20/2026. 
Key Points
- Multiple analysts lowered Microsoft price targets but kept bullish ratings intact.
- Slowing Azure growth and rising AI CapEx remain the biggest investor concerns.
- MSFT’s valuation has normalized, potentially creating a long-term buying opportunity.
- Special Report: Altucher: This is My Favorite FREE Starlink Pre-IPO Ticker
Microsoft Corp. (NASDAQ: MSFT) saw a slight bid last week as bulls hoped the conflict with Iran was nearing a conclusion. That didn’t stop several analysts from lowering their price targets on the stock. During the week of April 13–17:
It’s worth noting that in each case the analysts maintained an Outperform rating on MSFT, and the stock continues to have a consensus rating of Moderate Buy with a price target of $577.58 — a gain of more than 35%. MSFT is up almost 2% in the last five days. However, the stock remains far from its all-time high and is down over 13% in 2026. Headlines can only take the stock so far; to move materially higher the company will need to deliver a strong earnings report. This quarter, however, looks like another case where “good” may not be good enough. Microsoft Earnings Preview: Will Growth Be Enough?Microsoft is scheduled to report earnings on April 29 after the market closes. As of this writing, the whisper number has adjusted earnings per share (EPS) at $4.13, six cents above the consensus forecast of $4.07. That would represent a 19% year-over-year increase and a 19% earnings gain through the first three quarters of fiscal 2026 — notably higher than the projected 12.3% earnings gain over the next 12 months. Critics could point out that even at $4.13 the adjusted EPS would be one cent below the prior quarter. Since Microsoft delivered adjusted EPS of $4.13 in Q1 of FY2026, that would imply no sequential earnings growth. AI Spending Vs. Azure Growth: The Core DebateAnalysts expect slower growth as Microsoft continues to invest heavily in AI infrastructure. The company posted record quarterly capital expenditures (CapEx) of $37.5 billion, up 67% year over year. While Microsoft can afford that level of spending, the relevant question is for how long. Azure is still growing, but recent growth missed consensus estimates. In Q2, Azure AI accounted for roughly one-third of Azure’s total revenue growth. Microsoft hopes to more than double the Azure AI run rate — from about $13 billion to roughly $25 billion — by the end of fiscal 2026. If Microsoft can achieve that, revenue could scale as CapEx tapers, making the valuation appear cheap. Even if it falls short, some of the downside may already be priced into the stock. The Valuation Debate: Buy the Floor or Fade the CeilingAnalysts are forecasting 12.3% earnings growth over the next 12 months. That represents an acceleration versus the last two quarters but a slowdown relative to the recent past. As of April 20, MSFT trades at just over 26x earnings. For context, its average P/E has been roughly 34x over three years and about 32x over five years. That doesn’t make MSFT an obvious “screaming buy,” but it does suggest much of the froth has been removed. The company’s price-to-earnings-to-growth (PEG) ratio is around 1.6, which is attractive for a technology stock with Microsoft’s track record. This valuation is what made MSFT a buy around $350 and likely keeps it a buy at current levels. Still, the lowered price targets imply the near-term upside may be more limited than some investors hoped. That’s an important distinction for traders more than for buy-and-hold investors. The company’s dividend is well supported by the cash the business generates, even if some of that cash is used in the short-term to build AI infrastructure. Trade Setup Vs. Long-Term Investment CaseGiven that Microsoft may be oversold, the lower price targets make the near-term upside less attractive for traders. As a long-term investment, however, the buy-and-hold case remains compelling. There is always a chance Microsoft’s AI investments won’t deliver profits that justify a premium valuation, but the potential upside if they do — and the low probability that the strategy fails completely — argue in the company’s favor. Microsoft’s entrenched user base and diversified revenue streams give investors confidence that the company isn’t going anywhere. That’s why MSFT remains an attractive buy-and-hold, and possibly a modestly bullish trade ahead of earnings. . |
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