Microsoft Stock Soars as Analysts Raise Price Targets on Cloud and AI Potential

Microsoft stock target raised to $485; Piper Sandler cites cloud revenue potential By Investing.com

On Tuesday, Piper Sandler showed a positive stance on Microsoft Corporation (NASDAQ:MSFT), raising the tech giant's price target to $485 from $465, while maintaining an Overweight rating on the stock. The adjustment reflects the firm's optimism about Microsoft's cloud revenue growth prospects. The increase in the price target is backed by Microsoft's significant milestone of surpassing $100 billion in cloud services revenue between fiscal years 2010 and 2023, a period during which the company invested over $176 billion in capital expenditures and leases. Piper Sandler predicts that Microsoft could add the next $100 billion in cloud revenue within a much shorter timeframe, potentially just three years, suggesting a rapid acceleration in growth. The firm's analysis suggests that Microsoft's cloud revenue could double to over $200 billion by the end of fiscal year 2026. This projection is based on the expectation that critical data center investments will compress, supporting the anticipated revenue growth. The analyst from Piper Sandler highlighted the importance for growth investors to look beyond the current fears of an AI overbuild, focusing instead on the ongoing broader cloud transformation. This shift is expected to sustain Microsoft's double-digit growth in both top-line revenue and bottom-line results through 2030. Furthermore, the firm anticipates that cloud services, bolstered by advancements in AI, will constitute a larger portion of Microsoft's business. It is projected that cloud-related revenue could increase to 63% of the company's total revenue by fiscal year 2026, up from 53% currently and a mere 10% in fiscal year 2016. This indicates a significant shift in Microsoft's revenue mix towards its cloud segment over the next few years. In other recent news, Microsoft has been the subject of a recent analysis by Loop Capital, maintaining a $500 price target on the tech giant's stock. The firm expects solid fourth-quarter results and predicts a conservative guidance for the first quarter of the next fiscal year. Loop Capital also anticipates a modest rise in Azure's growth rate and strong adoption of Microsoft 365 Copilot. In addition, the firm views Microsoft as a key player in the ongoing generative AI trend, which is expected to boost cloud migration. In related developments, cybersecurity firm CrowdStrike (NASDAQ:CRWD) has been under scrutiny due to a global outage caused by a flawed software update. The malfunction affected approximately 8.5 million devices running Microsoft's Windows operating system, leading to widespread disruptions across various industries. CrowdStrike CEO, George Kurtz, has been summoned by the U.S. House of Representatives Homeland Security Committee to provide testimony on the matter. Investors are also eyeing the upcoming earnings reports from major technology companies, which could potentially influence market trends. Despite recent losses in the tech sector, positive numbers could reinforce the narrative of tech growth and profitability. In light of Piper Sandler's optimistic outlook on Microsoft Corporation (NASDAQ:MSFT), InvestingPro data provides a comprehensive financial perspective. Microsoft's market cap stands impressively at $3290.0 billion, reflecting its substantial presence in the market. The company's P/E ratio is currently at 38.21, suggesting a premium valuation which aligns with Piper Sandler's positive sentiment. Additionally, the firm's solid revenue growth of 13.97% in the last twelve months as of Q3 2023 further supports the potential for rapid acceleration in cloud revenue growth that Piper Sandler anticipates. Turning to InvestingPro Tips, it's noteworthy that Microsoft has raised its dividend for 18 consecutive years, underscoring a commitment to returning value to shareholders. Moreover, the company's cash flows can sufficiently cover interest payments, indicating financial stability. These aspects are crucial for investors considering the long-term profitability and sustainability of Microsoft's growth trajectory, particularly as it continues to expand its cloud services. For more in-depth analysis and additional tips on Microsoft, investors can explore InvestingPro, which offers 16 more InvestingPro Tips. Be sure to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

Microsoft Stock Has Further Room To Run, Says Analyst, As Software Giant Remains On Track To Hit $200B Cloud Revenue In 2 Years - Microsoft (NASDAQ:MSFT)

He sees the cloud transformation to help sustain double-digit top-line and bottom-line growth through 2030. Microsoft Corp. MSFT shares received a nice price target bump a week ahead of the software giant's quarterly earnings release. The Microsoft Analyst: Piper Sandler analyst Brent Bracelin reiterated an Overweight rating on Microsoft shares and upped the price target from $465 to $485. The updated price target suggests the stock has about 10% upside potential. Microsoft took 13 years (from fiscal 2010 to 2023) to achieve a $100 billion annual revenue run-rate for its Cloud services business but the next $100 billion cloud revenue could come in just three years, said Bracelin in a note. Over the 13-years, capex and lease exceeded $176 billion, he noted. The critical data center investments should, therefore, be compressed to support a potential doubling of Microsoft Cloud revenue to $200 billion+ exiting fiscal year 2026, he said. "Growth investors should look beyond near-term fears of an AI overbuild with the lens of a broader cloud transformation still underway that could help sustain double-digit top-line and bottom-line growth through 2030," the analyst said. He expects the Cloud mix, aided by AI, to expand to 63% by fiscal year 2026, up from 53% today and sharply higher than the 10% in fiscal 2016. See Also: Best Artificial Intelligence Stocks Azure, which accounts for 33% of sales, is approaching a $85 billion run-rate, with growth exceeding 30%, Bracelin said. The analyst expects June quarter Azure revenue growth of 32% on a constant currency basis compared to the 30-31% guidance, with AI contributing at least seven percentage points of growth. The analyst noted that a majority of Microsoft AI shows up in IaaS rather than SaaS, with the proportion at 95% vs. 5%. He expects capex and lease to surpass $19 billion in the June quarter. As such, the analyst increased his calendar year 2025 earnings per share estimate by 17 cents on slightly higher growth assumptions, and the calendar year 2025 P/E multiple from 33 times to 34 times on strong cloud momentum. The upward adjustment to the price target is to give effect to the revisions to the earnings estimate and the P/E multiple, he added. Microsoft is scheduled to report its fiscal year 2024 fourth-quarter earnings after the market closes on Tuesday, July 30. Analysts, on average, expect the company to report earnings per share of $2.93 and revenue of $64.35 billion. This compares to the year-ago earnings of $2.69 per share and revenue of $56.19 billion. Microsoft Price Action: Microsoft shares ended Monday's session up 1.33% to $442.94, according to Benzinga Pro data. The stock has gained over 18% year-to-date. Read Next: Tesla, Alphabet, GM, Ford Lead Earnings Parade This Week As Market Struggles To Sustain The Summer Rally Photo by Volodymyr Kyrylyuk on Shutterstock Market News and Data brought to you by Benzinga APIs

Microsoft gains as Piper Sandler boosts price target on cloud, AI strength

Microsoft (NASDAQ:MSFT) was in focus on Tuesday after Piper Sandler increased its price target on the tech giant, citing strength in its cloud business, notably due to artificial intelligence. Shares rose fractionally in premarket trading. "It took 13 years for Microsoft Cloud services to cross over the $100B revenue milestone between F2010-F2023, which included roughly $176B+ in aggregate capex+lease spend," analyst Brent Bracelin wrote in an investor note. "The next $100B in cloud revenue could be added in just three years, compressing critical data center investments required to support a potential doubling of Microsoft Cloud revenue to $200B+ exiting F2026. Growth investors should look beyond near-term fears of an AI overbuild with the lens of a broader cloud transformation still underway that could help sustain double-digit top-line and bottom-line growth through 2030." Bracelin raised his price target on Microsoft to $485 from $465 and kept his Overweight rating. Microsoft has already been one of the largest beneficiaries of the AI boom, but Bracelin said there is more to come. By 2026, the revenue mix for cloud aided by AI could rise to 63%, up from 53% today and just 10% in fiscal 2016. Azure is believed to be approaching an $85B run-rate, with growth topping 30% year-over-year, Bracelin added, including seven percentage points related to AI.

Piper sees a potential doubling of Microsoft Cloud revenue to $200B+ exiting F2026 By Investing.com

Piper Sandler analysts reiterated an Overweight rating on Microsoft (NASDAQ:MSFT) shares on Monday, projecting that Microsoft Cloud revenue could reach $200 billion by the end of 2026, driven by strong capital expenditures (capex). The investment bank highlighted that Microsoft Cloud services took 13 years to surpass the $100 billion revenue milestone from fiscal 2010 to 2023, with an aggregate capex and lease spend of over $176 billion. Analysts said the next $100 billion in cloud revenue could be achieved in just three years, accelerating the necessary data center investments to potentially double Microsoft Cloud's revenue to over $200 billion by the end of FY2026. "Growth investors should look beyond near-term fears of an AI overbuild with the lens of a broader cloud transformation still underway that could help sustain double-digit top-line and bottom-line growth through 2030," analysts commented. With AI's contribution, the cloud mix could increase to 63% by FY2026, up from 53% today and 10% in FY2016. Alongside these projections, analysts have also raised their price target on MSFT stock from $465 to $485, based on slightly higher estimates and a target price-to-earnings (P/E) ratio of 34x. Microsoft is scheduled to announce its Q4 financial results on July 30, after the US market closes. Analysts expect Microsoft's Q4 2024 revenue to rise 14.5% year-over-year to $64.4 billion, up from $56.2 billion in Q4 2023. However, this would indicate a slowdown in growth compared to the 17.0% year-over-year increase seen in Q3 2024. Earnings per share (EPS) are projected to grow by 9% from the previous year to $2.931, up from $2.69 in Q4 2023. This also represents a deceleration from the 20% year-over-year growth reported in Q3 2023.

Loop Capital maintains price target, reiterates Buy on Microsoft stock By Investing.com

On Tuesday, Loop Capital reiterated its Buy rating on shares of Microsoft Corporation (NASDAQ:MSFT), maintaining a price target of $500.00. The firm anticipates solid fourth-quarter results for the fiscal year ending in June, expecting growth trends similar to those seen in the third quarter. Despite signs of acceleration in business trends, Microsoft is predicted to provide guidance for the first quarter of the fiscal year that aligns with expectations, reflecting a conservative stance. Industry checks suggest a steady yet unspectacular IT spending climate, with a more significant increase in IT budgets anticipated in the second half of the calendar year. Regarding cloud services, a slight moderation is expected in the quarter, potentially resulting in a modest rise in Azure's growth rate compared to the third quarter, which had exceeded growth guidance by 300 basis points. The continued effects of cost optimization and a deceleration in seat-based Enterprise Mobility + Security (EMS) growth are likely to have a modest impact on Azure's overall growth rate. However, advancements in artificial intelligence (AI) are believed to more than compensate for these factors. Cloud consumption growth is projected to pick up in the second half of the calendar year as new cloud deployments from the first half become operational. Moreover, strong adoption and demand for Microsoft 365 Copilot have been observed, particularly in the context of specific use-case scenarios presented by global system integrators (GSIs). Financial contributions from the M365 Copilot business are expected to be minimal until the latter half of the fiscal year. Loop Capital also expressed a positive outlook on Microsoft's Windows business, citing AI-powered PCs as a catalyst for a new PC refresh cycle in both consumer and commercial markets. Loop Capital views Microsoft as a prime investment to capitalize on the ongoing generative AI (GenAI) trend, which is also expected to boost the migration of workloads and data to the cloud. The firm's discounted cash flow (DCF) analysis supports a $500 price target, implying a conservative 21% free cash flow (FCF) compound annual growth rate (CAGR) over the next seven years. In other recent news, cybersecurity firm CrowdStrike (NASDAQ:CRWD) has been under scrutiny due to a significant global outage caused by a flawed update in the company's security software. The malfunction, which affected computers running Microsoft's Windows operating system, led to widespread disruptions in internet services across industries such as airlines, banking, and healthcare. Microsoft reported that approximately 8.5 million Windows devices suffered from the software issue. CrowdStrike CEO, George Kurtz, has been summoned by the U.S. House of Representatives Homeland Security Committee to provide testimony on the matter. Analysts from Guggenheim and RBC Capital Markets have voiced differing perspectives on the impact of the outage on CrowdStrike's future contracts and overall standing in the cybersecurity market. In relation to the tech sector, the upcoming earnings reports from major technology companies are expected to influence market trends. Despite recent losses in the sector, positive numbers could reinforce the dominant narrative of tech growth and profitability. However, the sector's performance is being closely monitored due to concerns about high valuations and sustainability. These recent developments underscore the importance of robust cybersecurity measures and the potential impact of tech sector trends on the broader market. In light of Loop Capital's optimistic outlook on Microsoft Corporation (NASDAQ:MSFT), a glimpse into the company's financial health and market performance through InvestingPro data may offer additional insights. Microsoft's robust market capitalization of $2.29 trillion underscores its significant presence in the industry. With a trailing P/E ratio of 37.72, the company trades at a premium, reflecting its strong market position and investor confidence in its growth potential. Moreover, Microsoft's revenue growth over the last twelve months, at nearly 14%, indicates a solid top-line expansion, supporting the notion of steady business growth. InvestingPro Tips suggest that Microsoft has been a consistent player regarding shareholder returns, having raised its dividend for 18 consecutive years. Moreover, the company's stock is known for its low price volatility, providing a measure of stability for investors. For those interested in diving deeper into Microsoft's financials and market performance, InvestingPro offers a wealth of additional tips, with 16 more available at https://www.investing.com/pro/MSFT. To access these valuable insights, readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.