When you open up a letter from the IRS and discover a bill for $28.9 billion dollars, one of two things comes to mind. Either someone’s made a serious mistake, or you’re Microsoft (NASDAQ:MSFT). In this case, however, it may be both, and Microsoft is already shrugging off the word from the IRS that says it owes more in back taxes than Zimbabwe made in all of 2022. That was enough for investors, who sent Microsoft up fractionally in Thursday morning’s trading.
As it turns out, Microsoft may well have reason to shrug off that bill. Word from KeyBanc Capital Markets noted that the $28.9 billion bill—which, amazingly, doesn’t include interest and fines that go along with it—may be “inflated.” But Microsoft, for its part, notes that it considers the proposed amount to not be the final amount and does not reflect taxes that were already paid as part of the Tax Cuts and Jobs Act. If those numbers were included, the amount would drop by as much as $10 billion. Microsoft is prepared to take the matter to court if needed.
Even if Microsoft fails to get its tax bill cut, the matter won’t be too much of a problem. Microsoft noted that its allowances for income tax issues are sufficient, or at least were as of about two weeks ago. In fact, KeyBanc’s own figures noted that the IRS payment would represent a “…1% reduction in annual net income,” so damage would likely be minimal for the year. Moreover, the full payment likely wouldn’t be made until 2025 anyway.
What is the Target Price for Microsoft in 2023?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 30 Buys and four Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average MSFT price target of $397.19 per share implies 19.46% upside potential.
