Microsoft ‘s strong track record during economic downturns should give investors hope in the new year, Goldman Sachs said Friday. The firm named Microsoft a top pick for 2023 while reiterating its price target at $315, which implies an upside of 27.3% over Thursday’s close. “Microsoft’s large footprint within the enterprise and its vast product portfolio … leaves it well positioned to continue to expand its wallet share amongst its customers despite a slower IT spending environment and a weaker consumer,” Rangan said in a note to clients. “The strategic positioning of Microsoft within enterprises can be elevated by customers’ heightened focus on optimizing IT spend and consolidating their technology stack with existing vendors.” Rangan said the company will feel pressure from recent sliding demand in cyclical business areas like personal computers and advertising. But he said fiscal first-quarter 2023 results show healthy growth in key strategic areas for the company. He noted that investors should look at Microsoft’s prior ability to increase earnings power through making itself more efficient and leaning on capital allocation, which he said includes partaking in dividends and share repurchases. Meanwhile, Rangan said investors can assume conservatism from management due to the sliding consumer spending and business contractions seen more broadly. He said that assumption “clears the way” for better outperformance in future quarters, which can help rebuild confidence among investors. Microsoft, like much of Big Tech, has floundered in 2022 as the Federal Reserve raises rates to fight inflation. The stock is down 26.4% year to date. — CNBC’s Michael Bloom contributed to this report.
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