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June 25, 2019, 10:55 a.m. EDT

Microsoft's Azure 'will likely never see margins' like Amazon's AWS, says Jefferies

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By Emily Bary

Microsoft Corp. shares /zigman2/quotes/207732364/composite MSFT -1.32% are down 1.7% in Tuesday morning trading after the only analyst with a bearish rating on the stock, Jefferies' John DiFucci, reiterated his downbeat view. "Microsoft is one of the greatest software success stories in the short history of the sector, but we believe that Microsoft, the stock, is materially overvalued," wrote DiFucci. "Azure will probably never see the margin broadly expected due to cultural and technical factors, and a recent unprecedented boost to cash flow from Windows may not persist." He argued that Microsoft "will likely never see margins similar to AWS at scale" because Amazon.com Inc.'s /zigman2/quotes/210331248/composite AMZN +0.56% cloud business is used to being efficient. DiFucci raised his price target to $90 from $80 in his note to clients, while citing a Mark Twain quote to convey his view of his position on Wall Street: "Whenever you find yourself on the side of the majority, it's time to pause and reflect." His new $90 target is still 33% below Microsoft's recent price of about $135. Shares have gained 33% so far this year, as the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.22% has risen 14%.

/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 139.70
-1.88 -1.32%
Volume: 3.31M
Oct. 16, 2019 10:02a
P/E Ratio
27.59
Dividend Yield
1.46%
Market Cap
$1080.98 billion
Rev. per Employee
$902,473
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,777.24
+9.86 +0.56%
Volume: 490,919
Oct. 16, 2019 10:02a
P/E Ratio
73.82
Dividend Yield
N/A
Market Cap
$874.25 billion
Rev. per Employee
$359,671
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,964.91
-59.89 -0.22%
Volume: 29.25M
Oct. 16, 2019 10:02a
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