03. Microsoft Corporation (NASDAQ:MSFT)
Upside Potential: 25%
On June 13, Tigress Financial increased its price target for Microsoft Corporation (NASDAQ:MSFT) by $75 to $550 per share, indicating a substantial potential upside of 25%. This bullish adjustment reflects Tigress Financial’s confidence in Microsoft Corporation (NASDAQ:MSFT) strategic positioning within the competitive technology and AI markets, as well as its robust financial performance. Analyst Ivan Feinseth emphasized Microsoft Corporation’s (NASDAQ:MSFT) proactive integration of AI capabilities, particularly evident in products such as ChatGPT, which is anticipated to drive significant growth and innovation across various business operations.
Microsoft Corporation’s (NASDAQ:MSFT) recent financial results have further bolstered this optimism. In Q1 2024, the company surpassed expectations with earnings per share (EPS) of $2.99, underscoring strong revenue growth, especially within its cloud computing segment. The robust performance of Azure and increasing demand for Microsoft Corporation (NASDAQ:MSFT) AI-powered solutions are key drivers fueling Tigress Financial’s positive outlook on the stock.
The strategic investments Microsoft continues to make in AI and cloud technologies, coupled with its strategic acquisition of Activision Blizzard, are viewed as crucial elements for future growth and market expansion. Analysts maintain a strong buy consensus for Microsoft Corporation (NASDAQ:MSFT), recognizing its leadership in technological innovation and its ability to capitalize on evolving industry trends. This upward revision in price target underscores Tigress Financial’s belief in Microsoft Corporation (NASDAQ:MSFT) continued trajectory of success and its potential to deliver sustained value to shareholders in the foreseeable future.
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.”
While we acknowledge the potential of MSFT as an AI play, our conviction lies in the belief that some 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.
