A Top-rated analyst from Jefferies, Brent Thill, recently rated Microsoft (MSFT) stock a Buy with a target price of $550, which implies a 40.6% upside potential. The analyst views the recent drop in MSFT stock price as a good buying opportunity as the current valuation reflects reduced risks, making it more attractive.
Microsoft stock is down about 11% in the past three months. This fall is primarily due to concerns about the company’s $80 billion AI investment plans this year. Also, investors are worried about weakness in its Azure cloud computing unit.
Why Could Microsoft Stock Surge?
Importantly, Thill believes several factors could lead to an increase in MSFT stock price. These include steady or improving growth in Azure and M365 cloud services. The analyst noted the solid fundamentals of both services, which make up 53% of Microsoft’s business.
He also expects Microsoft to expand its profit margins further despite the large AI investments. Lastly, as the company’s spending on infrastructure (capex) slows down, the firm anticipates stronger free cash flow, which could positively impact the stock.
Overall, Thill considers Microsoft one of its top choices among large-cap companies.
MSFT “Perfect 10” Smart Score Signals Strong Potential
Microsoft has a “Perfect 10” Smart Score on TipRanks, which implies that the stock has the potential to beat the benchmark index.
The stock has received a positive signal from hedge funds. Our data shows that hedge funds bought about 2 million shares of the company in the last quarter. The stock also enjoys bullish Blogger sentiment and Positive News Sentiment on TipRanks.
Furthermore, MSFT’s Strong Buy consensus rating on TipRanks is another factor supporting its top Smart Score.
What Is the Price Target for MSFT?
Turning to Wall Street, MSFT stock has a Strong Buy consensus rating based on 32 Buys and two Holds assigned in the last three months. At $511.37, the average Microsoft price target implies a 30.7% upside potential.
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