Microsoft's June-quarter report could be "messy" as the software giant deals with weakening personal computer sales, a Wall Street analyst said. Microsoft stock fell on Monday.
The Redmond, Wash.-based company plans to report its fiscal fourth-quarter results on July 26.
"While near-term investor sentiment has turned more negative and we see the potential for a messy quarter, our positive fundamental view remains unshaken," Deutsche Bank analyst Brad Zelnick said in a note to clients Monday.
Zelnick reiterated his buy rating on Microsoft stock with a price target of 350.
Microsoft Stock Dips
On the stock market today, Microsoft stock declined 1% to close at 254.25.
"Microsoft continues to screen as the highest quality name in our coverage," Zelnick said. "Much of our field work suggests IT spending is beginning to weaken, and we believe that if the environment is tough for Microsoft, then it's likely even tougher for most others."
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Analysts polled by FactSet expect Microsoft to earn $2.30 a share on sales of $52.4 billion in its fiscal Q4. That would translate to year-over-year growth of 6% in earnings and 13% in sales.
PC Sales Headwind
Softening PC sales will be a headwind for Microsoft in the June quarter, Zelnick said. Consumer PC sales are declining, and commercial PC sales are beginning to show weakness, he said. Those trends will impact sales of its Windows operating system and Office productivity software, as well as Microsoft Surface PCs.
Meanwhile, Microsoft's Azure cloud-computing infrastructure business is facing global capacity shortages due to server supply-chain constraints, Zelnick said.
Elsewhere on Wall Street, BofA Securities analyst Brad Sills maintained his buy rating on Microsoft stock with a price target of 345. He rates Microsoft stock as a "top pick."
In a note to clients, he cautioned that any strength in the company's cloud-computing business in the June quarter is likely to be offset by PC weakness.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
