2. Microsoft Corp Inc (NASDAQ:MSFT)
Number of Hedge Fund Investors: 293
MSFT is one of the top members of the Mag. 7 group of stocks which Aswath Damodoran called AI “value” stocks that have become “money machines.” In September last year, he said MSFT was one of the direct beneficiaries of AI and that’s why “some” of its stock rally was “justified.”
New Street Research started covering the stock with a Buy rating. The firm said that Microsoft Corp (NASDAQ:MSFT) is well positioned to grow profit in the “low teens for years to come” even if the AI revolution fails to pan out. New Street Research has a $570 price target on Microsoft Corp (NASDAQ:MSFT).
Analysts believe Microsoft Corp’s (NASDAQ:MSFT) AI ecosystem around its products would strengthen its Cloud division thanks to Microsoft Corp’s (NASDAQ:MSFT) integration of AI into its Cloud products. Microsoft Corp’s (NASDAQ:MSFT) Intelligent Cloud segment’s profit in the latest quarter totaled $12.51 billion, a whopping 32% growth on a YoY basis.
Microsoft Corp’s (NASDAQ:MSFT) huge investments to revive its Search business are also working. Bing’s market share has jumped to 3.64% as of April 2024, a 0.88 points gain on a YoY basis.
Wall Street expects Microsoft Corp’s (NASDAQ:MSFT) earnings to grow 12.50% next year. The stock’s forward P/E of 31 based on 2025 EPS makes it look attractive at the current levels. Average analyst estimate for Microsoft Corp (NASDAQ:MSFT) is $483, which presents a 14% upside potential from the current levels.
Aristotle Capital Value Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT), a leading technology company specializing in software, hardware, cloud services, AI and digital applications, was one of the largest contributors during the quarter. The company continues to execute on a myriad of catalysts across its businesses, particularly within cloud‐based applications like Azure and platform‐based servicessuch as LinkedIn. For Azure, Microsoft detailed previously announced partnerships with NVIDIA and AMD to develop first‐party silicon chips and custom‐ designed infrastructure innovations, including its AI accelerator (Azure Maia) and CPU (Azure Cobalt). These advancements are part of Microsoft’s strategy to enhance AI performance and efficiency within the Azure ecosystem. LinkedIn, which has more than doubled its membership to over one billion in the past four years, is expanding its revenue streams across subscriptions and advertising and increasingly disrupting traditional recruiting and training functions. LinkedIn recently passed $16 billion in run rate annual revenue, which is only ~7% of total Microsoft revenue, but if it were a standalone business, it would be in the top half of S&P 500 constituents! The Azure and LinkedIn examples are just two of many that illustrate Microsoft’s ongoing transformation from an operating system to a total technology solutions provider.”
