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Nomura Securities Upgrades Microsoft (MSFT) to Buy; Shareholders Will Support Activism

August 22, 2013 7:46 AM EDT Send to a Friend
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Price: $43.16 -0.96%

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    23 Buy, 23 Hold, 1 Sell

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    Up: 26 | Down: 32 | New: 6
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Nomura Securities upgraded Microsoft (NASDAQ: MSFT) from Neutral to Buy with a price target of $38.00.

Analyst Rick Sherlund said frustrated shareholders could support change at Microsoft.

"MSFT was removed from our Buy list in April on poor fundamentals, but we are now adding it back on anticipated benefits of shareholder activism," Sherlund comments. "ValueAct owns under a 1% position, but is likely to have support of shareholders weighing in on their side as they press for a Board seat and attempt to drive greater shareholder value."

He added, "News of a proxy contest might be a near-term catalyst (there is a requirement to notify Microsoft by August 30th if there is an intent to fight a proxy battle), but a decision by the board at Microsoft to offer a nomination for a board seat could keep the activist agenda behind closed doors and take longer for shareholders to see potential benefits. Fundamentals will be front and center at the September 19th Financial Analyst Meeting (“FAM”) We think estimates will likely be talked lower on lower gross margins (we are reducing our EPS estimate from $2.75 to $2.60 for fiscal 2014 in anticipation), but there are some benefits over time from the transition to a subscription model."

For an analyst ratings summary and ratings history on Microsoft click here. For more ratings news on Microsoft click here.

Shares of Microsoft closed at $31.61 yesterday.




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Related Categories

Analyst Comments, Analyst EPS Change, Hot Upgrades, Upgrades

Related Entities

ValueAct Capital, LLC, Nomura

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