Stifel upgraded Microsoft to buy from hold and raised its price target to $575 from $530, pointing to Azure and Copilot as growth drivers. The firm sees mid-to-upper-teens revenue growth ahead even as the stock has slipped about 2% over the past year.
Stifel raised its price target on Microsoft to $575 from $530, implying 15% upside from Tuesday's close, and upgraded the stock to buy from hold. Analyst Brad Reback pointed to Azure and Copilot as the drivers behind the call.
Azure and Copilot underpin the upgrade
Reback said open-weight model advancement has boosted Microsoft's large-language-model-agnostic strategy across Azure and Copilot, supporting his view that the company can sustain mid/upper teens revenue growth. He added that operational efficiencies should keep operating margins stable and that strong cash flows should limit Microsoft's need for outside financing.
For Microsoft 365, Reback expects product improvements to sustain strong Copilot adoption. Combined with growing GitHub consumption, according to Stifel: "we believe this should support mid/upper teens growth."
Shares have lagged despite the AI buildout
Microsoft shares have come under pressure as capital expenditures have ballooned due to infrastructure demands for Azure and investment in Copilot. The stock has edged down 2% over the past year.
Still, Reback expects Copilot and Azure to fuel Microsoft's growth over the next year or so, lifting the shares. He said Azure operational efficiency efforts, disciplined capex spending and focused opex growth should let Microsoft sustain current operating margins, following gross-margin concerns earlier this year.
Stifel's call falls in line with consensus on Wall Street. Of the 60 analysts covering Microsoft, 57 have a buy or strong buy rating on the stock, according to LSEG data.
Source: CNBC
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