Microsoft Corporation (NASDAQ:MSFT) stock was upgraded, with stockbroker Wedbush raising its price target to $450 per share from $425, driven by an increasingly bullish view on the software and cloud computing firm’s ability to monetize AI.
“We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth coming to the Redmond story with FY24 with a strong competitive cloud edge vs. Amazon and Google,” analyst Daniel Ives said in a note.
The analyst described it as Microsoft’s ‘iPhone moment’, as the broker sees AI as a catalyst that will change the cloud growth trajectory over the next few years.
“Our recent partner checks have been incrementally strong around Co-Pilot deployments with MSFT customers and ultimately we estimate this could add another ~$25 billion to Redmond's top-line by FY25.
“Over the last few weeks in our numerous conversations with Microsoft customers, partners, and field checks it has become crystal clear to us that the monetization opportunities around deploying AI and ChatGPT in the cloud is a transformational opportunity across the industry with Redmond in the drivers seat.
“We estimate for every $100 of cloud Azure spend with MSFT the last few years there is an incremental $35-$40 of AI spend for Nadella & Co looking ahead.”
“Our thesis remains that the cloud and underlying Office 365/Windows ecosystem is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins into the rest of FY24/FY25.”
The bullish ‘outperform’ rating at Wedbush with its new price target at $450 sees some 20% upside to the current Microsoft price of $374.93.