We recently published a list of 10 Buzzing AI Stocks on Latest News and Analyst Ratings. Since Microsoft Corporation (NASDAQ:MSFT) ranks 1st on the list, it deserves a deeper look.
Investors are still digesting the Fed’s aggressive rate cut and charting the path forward. Roger Altman, Evercore founder and senior chairman, said while talking to CNBC in a latest program that the Fed was not “behind the curve” but it went with a higher-than-expected rate cut amid labor market concerns.
Asked if he thinks we are headed toward a soft landing scenario, Altman said yes, as he believes growth is “resilient” and corporate profit outlook is good. Altman said equity markets are headed to have their best year since 1960.
“If the landing is finished and the Fed hits its target, Powell will deserve an A and it would be a pretty miraculous achievement,” Altman said.
While the analyst believes currently it’s a “near perfect” overall environment for the market, he did point to “storm clouds” gathering over the international stage including the expanding crisis in the Middle East, Russia’s war on Ukraine and America’s overall fiscal situation.
For this article we chose 10 trending AI stocks based on latest news and analyst ratings. With each company we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Microsoft Corp (NASDAQ:MSFT) is trending after the company announced a dividend hike and a $60 billion stock buyback program. Mizuho Securities recently reaffirmed its Outperform rating on the stock with a $480 price target, with analyst Gregg Moskowitz noting that the buyback amount matches what was announced three years ago, and no change is expected in the repurchase pace.
Moskowitz highlighted Microsoft Corp (NASDAQ:MSFT) long-term growth potential, emphasizing the significant opportunities from generative AI adoption and the company’s ability to monetize it.
Microsoft Corp (NASDAQ:MSFT) shares fell following its latest quarterly results which showed the company’s Cloud business growth was lower than expected. For the ongoing quarter, Microsoft Corp (NASDAQ:MSFT) expects revenue in the range of $63.8B and $64.8B, compared to the $65.07B estimate. Microsoft Corp (NASDAQ:MSFT) Azure revenue is expected to grow by 28% and 29% year over year.
But what about AI? While Microsoft does not mention specific AI numbers, analysts believe Copilot is already playing a key role in growth at several segments of the company. Microsoft Corp (NASDAQ:MSFT) Office’s commercial customer sales soared to $48 billion, significantly up from last year’s 10% growth, likely driven by Copilot Pro subscriptions. Office for individual users also saw a boost, with sales reaching $6.2 billion, a 4% increase compared to last year’s 2% growth, indicating accelerating growth from Copilot integration. Dynamics ERP and CRM software sales hit $6.3 billion, up 19%, surpassing last year’s 16% growth. This uptick is likely due to customers switching to Dynamics for the Copilot integration in the Dynamics Contact Center platform, which provides automated customer service chatbots and significant cost reductions. Bing sales jumped 3% year over year as more users switched to the search engine from Google Search, thanks to AI features.
While Microsoft Corp (NASDAQ:MSFT) expenses are expected to remain elevated, its investments are working and would bear fruit in the long term. The stock is down about 11% over the past month. It trades 26x next fiscal year’s earnings. MSFT could be an attractive buy on the dip for long-term investors.
Mar Vista Focus strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) continues to occupy a strong position, poised to capture market share as businesses, both large and small, navigate the transition to a digital-first landscape and embrace generative AI-driven solutions. The company’s commanding presence in the enterprise arena, combined with its comprehensive product portfolio encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), establishes it as a crucial provider of IT solutions for companies of all scales. Microsoft is effectively executing its strategy in a sizable market by offering a roadmap for digital transformation and adoption of innovative, AI-driven solutions, such as ChatGPT, while enhancing productivity and reducing costs. Consequently, we anticipate that Microsoft’s solutions should exhibit resilience even in a more challenging macroeconomic environment, supporting low-double-digit growth in intrinsic value within our investment horizon.”
Overall, Microsoft Corporation (NASDAQ:MSFT) ranks 1st on Insider Monkey’s list titled 10 Buzzing AI Stocks on Latest News and Analyst Ratings. While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
