Microsoft (MSFT) shares dropped on Thursday following a downgrade from analysts at KeyCorp (KEY). The firm cited challenges in the AI industry and its possible pressure on Microsoft’s earnings as its rationale behind the downgrade.
KeyCorp’s rating drops from a strong buy (market overweight) to a “sector weight” (buy) with no change to the company’s target price for Microsoft stock.
Current Wall Street analyst recommendations for Microsoft remain heavily weighted in the “buy” category, a sign that the company may see additional downgrades as the market normalizes from its optimistic extremes.
Microsoft’s downgrade represents the seventh analyst downgrade to the Magnificent Seven group of stocks in 2025. NVIDIA – another Mag Seven stock – saw its target price downgraded by two Wall Street firms – Raymond James and Bank of America) this week, another sign that analysts are growing more concerned about AI stock valuations.
The stock downgrade comes just weeks after an announcement from Microsoft that the company was slowing its data center expansion plans. The late March announcement triggered a swift -10% decline in Microsoft stock to its recent lows of $350.
Adding to the market’s nerves about Microsoft’s outlook are the company’s quarterly earnings call set to for April 30.
Last quarter, Microsoft handily beat its estimates for revenue and earnings as the company grew year-over-year revenue by 12.3%. Shares dropped 6.75% over the following five trading days on a weaker than expected outlook from Microsoft’s management.
Since then, shares have dropped an additional 10% to their current price of $370. That $370 stands as a key technical test for Microsoft’s near-term price outlook.
$370 is the same price that the stock saw a short-term consolidation just two weeks ago. That short-term strength gave way to a sharp decline to $350 as the market reacted to the new Trump tariffs. The former consolidation at $370 indicates that a second break below this level will increase selling pressure from investors.
Compounding Microsoft’s technical situation is the fact that the stock’s 50-day moving average is in an accelerating bear market trend. This forecasts that the price has a 67% chance of closing each trading day.
Investors looking to buy the deep dip in Microsoft shares need to maintain a cautious eye on the $350 price. This price served as strong resistance in 2023. Historically, prices that lend strong resistance or support for a stock act as a “trigger” to accelerate current trends. This means a break below $350 would see Microsoft shares take aim at a new low price of $300.
Microsoft broke into a long-term bear market trend in March and maintains an intermediate-term bearish target price of $300.
