Analysts at Jefferies are “increasingly bullish” on Microsoft Corporation (NASDAQ:MSFT)'s artificial intelligence (AI) potential after attending the tech giant’s Envision event in New York.
The analysts said they came away from the event incrementally positive on the ability of Microsoft Copilot, Microsoft’s AI assist feature for Microsoft apps and services, to drive revenue uplift in the 2024 calendar year.
“Given the announcement of most Copilots being generally available within the next 12 months, we continue to maintain optimism that Microsoft 365 (M365) Copilot can potentially go generally available in the 2023 calendar year,” they wrote.
They noted that, per management’s commentary, M365 is currently available in a private preview to about 600 enterprise customers and there are already thousands of organizations in the pipeline waiting to adopt it.
“Our conversations put this number already north of 10,000, despite preannouncing a significant pricing uplift ($30 per user per month),” they wrote.
They also pointed to a potential sales lift from Microsoft Sales Copilot.
“If M365 Copilot users wish to leverage other 3rd party CRM systems data (not utilize Dynamics), then those users would need to purchase Sales Copilot (incremental $40 per user per month),” they explained.
The analysts wrote that investors have tempered their near-term AI revenue expectations, creating an attractive risk-reward for Microsoft.
“With MSFT down 4% since fiscal fourth quarter results and trading at just 28.5 times our 2025 financial year earnings per share estimate of $11.77, risk/reward looks attractive, especially considering that we are not baking any revenue uplift from AI into our model,” they wrote.
“Overall, we are bullish on MSFT's Copilots ability to drive upside to 2025 financial year numbers.”
Following Microsoft’s Envision event, the Jefferies analysts reiterated their ‘Buy’ rating on the company’s stock with a $400 price target.
“We remain bullish on the long-term AI tailwinds with our $400 price target representing about 30 times the consensus estimate of $13.5 earnings per share for the 2025 calendar year,” they wrote.
Microsoft shares exchanged hands for $338.15 each in pre-market trading on Friday.
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