6. Microsoft Corp (NASDAQ:MSFT)
Billionaire Israel Englander’s Stake Value: $1,176,438,300
Microsoft Corp (NASDAQ:MSFT) is strongly positioned to benefit from the AI revolution sweeping across both software and hardware industries. The stock has a new growth catalyst in the form of AI PCs. Piper Sandler analysts Brent Bracelin, Hannah Rudoff and J.R. Herrera recently said in a note that Copilot Plus PCs could “spark a long-anticipated PC upgrade cycle.” They have a $465 price target with an Overweight rating on the stock.
During the fiscal third quarter, Microsoft Corp’s (NASDAQ:MSFT) revenue jumped 17% year over year to $61.85 billion, while its adjusted EPS saw growth of 20%. Microsoft Corp’s (NASDAQ:MSFT) Intelligent Cloud revenue growth came in at 21% on a YoY basis. Microsoft Corp’s (NASDAQ:MSFT) Cloud market share also grew to 25%, and the company is slowly but surely catching up to Amazon, which has about 31% market share. Analysts believe Microsoft Corp’s (NASDAQ:MSFT) AI ecosystem around its products would strengthen its Cloud division thanks to the company’s 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. Based on the growth catalysts mentioned above, 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.
Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its first quarter 2024 investor letter:
“Our second largest purchase during the quarter was the software platform, Microsoft Corporation (NASDAQ:MSFT), which we continued to add to, after initiating a position in the fourth quarter of 2023. Microsoft continues to report strong quarterly results, with revenue growth of 16% year-over-year in constant currency thanks to better-than-expected demand in its intelligent cloud segment, which saw revenue growth of 19% year-over-year, driven by Azure growth of 28% with AI contributing 6pts to growth compared with 3pts in the prior quarter. While the adoption of GenAI remains in its early stages, Microsoft has disclosed positive initial data points with 53,000 Azure AI customers as of its December quarter up from 18,000 in the prior quarter, 1.3 million paid GitHub Copilot subscribers (up 30% sequentially) and more than 230,000 organizations who have used AI capabilities in the power platform (up 80% sequentially). Management also noted that large cloud optimizations that started a year or so ago have largely finished. Profitability also continues to be strong with 44% non-GAAP operating margins, which was 120bps better than expected.”
