UBS said there is some weakness ahead for Microsoft. Analyst Carl Kerstead downgraded the tech giant to neutral from a buy, saying the latest round of on-the-ground checks on the business has reduced the bank’s confidence in the stock. “We are downgrading Microsoft stock to Neutral from Buy on the back of a weaker round of field checks (see link to report here) of cloud providers including Azure, a view that Office seat growth is likely to moderate in 2023,” Kerstead wrote in a note on Tuesday 2023. And that many Microsoft already feel is fair, not cheap.” At Azure, the analyst said the company’s growth engine is entering a “sharp growth slowdown” that could be worse in 2023 and 2024 than investors expect. Moreover, the analyst is concerned that the slowdown may be due to maturity in the business, not just the difficult economic backdrop. Meanwhile, Office 365 — which has been “a remarkably flat machine of late” for Microsoft — could slow revenue growth in 2023, as the seat-based business could take a hit from mounting pressure in the job market, according to the analyst. Microsoft shares fell nearly 29% in 2022, snapping a 10-year winning streak. Although this was a sharp drop, Microsoft fared slightly better than the high-tech Nasdaq Composite, which was down about 33%, as well as some other big tech stocks like Amazon, which ended last year down about 50%. Approximately. “This year-over-year performance and a modest -4% correction since a difficult September/Q1 print seems evidence of Microsoft’s diversified and relatively stable enterprise-focused portfolio,” Kerstead wrote. The “easy” call is that the relative outperformance in 2022 will simply repeat itself in 2023. We’re not making a material negative call on the stock, but at 24.5x CY23E FCF Microsoft shares have already embedded a “defensive premium” which is the long consensus “. The analyst’s price target of $250, down from $300, represents an upside of just 4% from Tuesday’s closing price for the stock. Shares of Microsoft fell about 2% in pre-market Wednesday trading. —CNBC’s Michael Blum contributed to this report.