4) Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Analysts’ Average Price Target: 14.30%
Microsoft Corporation (NASDAQ:MSFT) is engaged in developing and supporting software, services, devices, and solutions worldwide.
Microsoft Corporation (NASDAQ:MSFT) has a wide economic moat, backed by 2 segments specifically: productivity and business processes and intelligent cloud. Experts believe that customers value the company’s products as stand-alone solutions and its immense product breadth. Moreover, Microsoft Corporation (NASDAQ:MSFT)’s applications are tightly integrated, making the products even more sticky and appealing.
Microsoft Corporation (NASDAQ:MSFT) has adopted a subscription model for its Microsoft 365 software. Therefore, anyone who wants to use the company’s wildly popular suite of apps – such as Word, PowerPoint, and Excel – will be tied into its ecosystem for several years. Experts opine that the company’s revenues should continue to be supported by repeated customer engagement. This engagement helps generate revenue from the initial sale of services, which then allows Microsoft Corporation (NASDAQ:MSFT) to upsell and cross-sell other ones too.
Microsoft Corporation (NASDAQ:MSFT) has plans to raise its capital expenditures, with a majority of this going to the company’s cloud business and towards building its AI infrastructure. The company spent $55.7 billion in FY 2024, which includes ~$19 billion in 4Q 2024.
For FY 2025, the company expects continued double-digit growth in revenue and operating income. Regarding gaming, the Activision acquisition continues to support the company’s strategy of delivering content throughout all of its platforms and building a subscription business.
Analysts at Tigress Financial upped their price target on the shares of Microsoft Corporation (NASDAQ:MSFT) from $475.00 to $550.00, giving it a “Buy” rating on 13th June. Fred Alger Management, an investment management company, released a second-quarter 2024 investor letter. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
