Microsoft (despite their cloud tailwinds over the long-term, however) is not a good choice.NASDAQ:MSFTSalesforce (NYSE:CRMMacro headwinds have had a heavy impact on a number of industries (e.g., ). The possibility of a recession in 2023 is becoming more probable. It’s not possible to know where the bottom will lie for these blue-chip titans. Wall Street analysts see Microsoft and Salesforce as two high-quality companies that offer upside, despite the fact that high-growth investments may continue to fall in favor with rising interest rates through 2023.
Also, I see many situations where CRM and MSFT escape 2023 with gains. Let’s see how the two “Strong Buy” software stocks stack up As they plunge headfirst into a possible recession.
Microsoft is currently down about 35% from the all-time high it reached just over one year ago. Microsoft stock has held its value better than other FAANG names. Some of them lost more than 70% between peak and trough. Even though it is a good-run tech company with one of the most talented managers, 35% is a significant drop.
Even the most brilliant CEOs are not perfect. Satya Nadella Microsoft couldn’t withstand industry headwinds.
Microsoft’s cloud business Azure has been extremely robust over the years. However, a recent downgrade by UBS placed it in the spotlight. Azure growth could sink further if there is a recession in 2023. Microsoft isn’t likely to relax about future-looking initiatives which could be a complement to Azure.
Azure will eventually find its feet, once macroeconomic headwinds recede. Microsoft will continue to focus on projects it can control in the interim. Microsoft has also been investing significant sums in AI and gaming, other than the cloud.
Microsoft fights for the right of Activision Blizzard to be acquired as a game developer (NASDAQ:ATVI). The FTC wants to stop the deal. Although it reduces the likelihood of a successful takeover by a certain amount, I still believe that a deal is possible if the firm can show its case in court.
Microsoft will be a stronger force in gaming if the metaverse is realized. Microsoft could be one of the leading players in the metaverse over the next decade thanks to its gaming division.
It doesn’t matter whether or not Microsoft plays any role in metaverse Hardware, it is evident that few firms can match the firm on software.
OpenAI has been making noises in ChatGPT’s latest iteration. Microsoft’s $1 billion investment in the firm It has been a wise decision. Microsoft looks ahead to a possible recession by embracing next-generation AI. It’s evident that Microsoft sees tech trends that could drive it to growth for years after Azure runs dry.
What is the MSFT Stock Target Price?
Microsoft enjoys a lot of support from Wall Street. There are 25 Buys and three Hold ratings. This suggests that there is 28.35% upside to the MSFT stock prices of $288.69 on average.
Salesforce plans to reduce its workforce and adjust its capital structures in the future to eliminate impediments to innovation. Salesforce’s latest decision is to cut 10% of its workforce It was a surprise to many. CRM stock saw a modest rise following the news. But not everyone was bullish.
Big Short’s Michael Burry was surprised by the CRM stock rally. He expected a sharp plunge following such news. Salesforce is clearly in trouble, with CEO Michael Burry. Marc Benioff as sole CEO.
Salesforce will reduce costs by $3 billion to $5B with the latest round of job reductions. While these cuts may increase margins, they also have the potential to reduce sales growth in the short-term.
While Salesforce is facing many unknowns in 2023 it has a price/sales ratio of 4.5 which makes it one the most affordable cloud-based software players in the market. As the company tries to navigate an economic storm, the stakes are high.
What is CRM Stock’s Price Target?
Wall Street loves Salesforce. Salesforce’s average stock price target of $194.71 indicates a 38.6% upside possibility.
The Takeaway
The Fed may tighten further, which could mean that growth is not in high demand. But, I believe both firms will be the first to rebound once any dovish “pivot” is announced. The Fed, which recently demanded “more evidence” that inflation was falling before easing up on rate hikes, is hard to be more hawkish.
MSFT and CRM shares can be great longer-term bets if investors are open to more volatility to normalize inflation, peak interest rates, and other risks.
These opinions and views are those of the author, and not necessarily those of Nasdaq, Inc.