BofA maintains Buy on Microsoft stock with $510 target

Following the company’s guidance, BofA Securities revised their estimates and reiterated their Buy rating and top pick status for Microsoft (NASDAQ:MSFT)’s stock. The $510 price objective is rooted in a 38 times multiple of the calendar year 2026 estimated free cash flow (FCF), an increase from the previous multiple of 35. This adjustment reflects the potential acceleration due to the ramping AI cycle.The analysts at BofA Securities expressed confidence in Microsoft’s unique position to capitalize on the burgeoning AI opportunity. They believe Microsoft has the scale and capability to effectively monetize AI across a wide range of applications and infrastructure, which supports their positive outlook on the stock. Currently trading at a P/E ratio of 36.48, Microsoft’s valuation reflects high growth expectations. For deeper insights into Microsoft’s valuation and growth prospects, including 16 additional ProTips and comprehensive financial analysis, visit InvestingPro. Currently trading at a P/E ratio of 36.48, Microsoft’s valuation reflects high growth expectations. For deeper insights into Microsoft’s valuation and growth prospects, including 16 additional ProTips and comprehensive financial analysis, visit InvestingPro.

The analysts noted that issues with GPU/CPU shipment delays, which had affected the first half of the year, are now stabilizing. This improvement, coupled with the ongoing strong demand for cloud migration and AI workloads, is expected to lead to a more consistent pattern of financial performance surpassing expectations and upward revisions as the year progresses. The company’s robust revenue growth of 16.44% and strong profit margins support this optimistic outlook.

Following the company’s guidance, BofA Securities revised their estimates and reiterated their Buy rating and top pick status for Microsoft’s stock. The $510 price objective is rooted in a 38 times multiple of the calendar year 2026 estimated free cash flow (FCF), an increase from the previous multiple of 35. This adjustment reflects the potential acceleration due to the ramping AI cycle.

The analysts at BofA Securities expressed confidence in Microsoft’s unique position to capitalize on the burgeoning AI opportunity. They believe Microsoft has the scale and capability to effectively monetize AI across a wide range of applications and infrastructure, which supports their positive outlook on the stock.

In other recent news, ServiceNow (NYSE:NOW)’s fourth-quarter performance exceeded expectations, with a significant 150% quarter-over-quarter increase in Annual Recurring Revenue (ARR) for its NOW-Assist/AI products, reaching approximately $250 million. Despite the positive results, the company’s forward guidance was viewed as conservative, which analysts from Citi attribute to uncertain macroeconomic conditions and a shift in revenue recognition due to the introduction of ServiceNow’s new Agents model. Citi maintains a Buy on ServiceNow stock with a $1,432 target.

In a recent development, Euroclear announced a seven-year strategic partnership with Microsoft, aimed at enhancing its business ecosystem and technology infrastructure. This collaboration is expected to drive innovation through digital and data-centric initiatives, leveraging Microsoft’s cloud technologies and generative AI to streamline Euroclear’s platform development and operations.

BMO Capital Markets adjusted its outlook on Microsoft, reducing the price target from $495 to $490 due to concerns over Azure’s performance. Despite this adjustment, BMO maintains an Outperform rating for Microsoft, reflecting confidence in the company’s long-term growth potential. Similarly, Cantor Fitzgerald reaffirmed its Overweight rating on Microsoft, maintaining a price target of $509.

In the AI sector, Microsoft’s Azure Container Apps serverless GPUs are set to deploy the recently released DeepSeek-R1 AI model. This development is expected to streamline AI application development and deployment, offering more efficiency for users. However, Chinese AI startup DeepSeek’s chatbot has faced challenges in delivering accurate news, according to a recent audit by NewsGuard.

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