7. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders as of Q2: 279
Analyst Upside as of October 10, 2024: 21.71%%
Microsoft Edge is one of the most promising future stocks, according to analysts, as it is the biggest software provider. Additionally, the company is a leading player with a 25% market share in cloud computing while flexing its muscle in the multi-billion gaming industry with Activation’s Blizzard and Xbox.
With the aid of new generative artificial intelligence (AI) assistants, Microsoft Corporation (NASDAQ:MSFT) is well-positioned to increase its market share in those software categories. During the June quarter, the number of users of Microsoft 365 Copilot grew by more than 60%.
Regarding revenue from cloud infrastructure and platform services, Microsoft Azure lags behind Amazon Web Services; however, over the past year, Azure has gained a percentage point of market share thanks to its strengths in machine learning and artificial intelligence and according to CEO Satyr Nacelle, Azure AI’s customer base increased by almost 60% during that time.
The vast majority of Microsoft’s planned capital expenditure increases will go toward expanding its AI infrastructure and cloud business. In its fiscal year 2024, it spent $55.7 billion, of which $19 billion was spent in the fourth quarter.
Because of its strengths in cloud computing and enterprise software, Microsoft Corporation (NASDAQ:MSFT) is one of the businesses most positioned to profit from generative AI in the future. In fact, Wall Street predicts that over the next three years, the company’s earnings will increase by 13% per year.
Even though Microsoft Corporation (NASDAQ:MSFT) trades at a premium with a price-to-earnings multiple of 31, It is one of the most promising stocks given its record in returning shareholder value. The company already pays a 0.80% dividend yield. Additionally, the stock is rated as a strong buy based on 30 Wall Street analysts with an average price target of $504.73, implying a 21.71% change from the last price of $414.71.
In the second quarter, 279 hedge funds held positions in Microsoft (NASDAQ:MSFT), and their stakes amounted to $89.068 billion.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $135 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. The stock contributed to performance because of continued strong operating results and investor enthusiasm regarding Microsoft’s leadership across the secular megatrends of AI and cloud computing. Recent business momentum continued to show evidence of the strength and attractiveness of Microsoft’s product portfolio among its customer set: (1) Azure OpenAI – its suite of AI services – is now used by 65% of the Fortune 100 and contributed 7% of Azure revenue (an annualized run rate of $5.2 billion); (2) GitHub Copilot – its AI code writing service – is bending the productivity curve for developers (reports of 40%- plus improvements in developer efficiency) and now has 1.8 million paid subscribers, with growth accelerating to over 35% quarter-over-quarter; and (3) Copilot Studio – its AI application service that makes it easier for anyone to build an application, automate a workflow, or create a Copilot using natural language. 30,000 organizations across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over-quarter. In the March quarter, Microsoft again reported better-than-expected financial results, highlighted by Microsoft Cloud growing 23% year-over-year, with the fastest commercial bookings in six quarters, and Azure accelerating to 31% constant currency growth, up from 28% in the previous quarter. June quarter guidance came in-line with consensus, but the company provided higher guidance for the most important segment, Intelligent Cloud, on the back of continued strong trends across Azure and Azure OpenAI. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes.”
