Citi Maintains 'Buy' Rating on Microsoft (MSFT), Drops Price Target
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Citi maintains 'Buy' rating on Microsoft (Nasdaq: MSFT), but lowers price target from $41 to $36.
Citi analyst says, "In our view, a 12x multiple reflects investors “Fear” that MSFT may not be the product cycle-led margin expansion story many anticipated, “Uncertainty” about whether a Yahoo (Nasdaq: YHOO) deal will happen, and “Doubt” that its online investments will pay off. These are all valid concerns; however with F.U.D. in the driver’s seat, MSFT is compelling. At AH levels we believe investors have $3 of downside (to the stock’s 3 year low in ‘06) vs. $9 of upside (to our $36 PT). Climbing those $9 points should come as investors gradually shift away from the Yahoo debate and refocus on the strength of the core business. We’d view a large buyback announcement (pot. in the Fall) as the best signal of MSFT’s disinterest in acquiring all of Yahoo."
Microsoft Corporation develops, manufactures, licenses and supports a range of software products for computing devices. [SM]
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