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Investing.com - BofA Securities raised its price target on Microsoft (NASDAQ:MSFT) to $585.00 from $515.00 while maintaining a Buy rating ahead of the company’s fourth-quarter fiscal 2025 results scheduled for July 30. The tech giant, currently valued at $3.79 trillion, is trading near its 52-week high of $513.37. According to InvestingPro analysis, Microsoft’s stock appears overvalued at current levels, though the company maintains a "GREAT" financial health score.
The firm’s checks with Microsoft partners indicated Q4 deal activity was largely in line with the previous quarter. BofA expects potential for 0-1% upside to its fourth-quarter revenue estimate of $73.7 million, representing 13.9% year-over-year growth, which aligns with Microsoft’s current revenue growth rate of 14.13%.
Partner feedback highlighted Azure strength driven by steady cloud migrations and robust performance in security and data analytics. BofA projects Azure growth of 35.5% year-over-year in constant currency, with 18.0 percentage points coming from AI, versus their base estimate of 34.2%. InvestingPro data shows Microsoft’s impressive gross profit margin of 69.07%, reflecting its strong market position in cloud services.
BofA noted that while Microsoft stock has risen 30% since Q3 and trades at a premium compared to peers, the firm believes the sentiment and multiple will hold given Azure’s mid-30s growth rate despite challenging macroeconomic conditions, flattening capital expenditure as a percentage of revenue, and margin expansion.
The firm maintained Microsoft as its top pick, with the new price target representing 43x calendar year 2026 estimated free cash flow, or 2.5x adjusted for 17% growth, compared to 38x and 2.2x previously.
In other recent news, Microsoft is making strides in the nuclear energy sector by partnering with the Idaho National Laboratory to employ artificial intelligence in expediting permit processes for new nuclear power plants. This collaboration aims to streamline the creation of engineering and safety analysis reports, reducing the typically lengthy application process significantly. Meanwhile, TD Cowen has raised its price target for Microsoft to $580 from $540, citing the company’s strong position in the artificial intelligence market and the easing of capacity constraints for its Azure cloud platform. The firm maintains a Buy rating on Microsoft, expecting Azure growth to surpass current Wall Street predictions.
In the realm of quantum computing, Denmark’s EIFO and the Novo Nordisk (NYSE:NVO) Foundation are investing €80 million to establish QuNorth, a Nordic initiative that will house the world’s most powerful quantum computer, named Magne. This project, in collaboration with Microsoft and Atom Computing, is set to be operational by early 2027. Additionally, OpenAI CEO Sam Altman has publicly supported Nvidia (NASDAQ:NVDA) CEO Jensen Huang’s positive outlook on AI’s impact on job creation, countering concerns about job displacement. Altman emphasized that AI will enhance human capabilities and create meaningful employment opportunities.
In related nuclear developments, Oklo has completed Phase 1 of its pre-application readiness assessment with the Nuclear Regulatory Commission for its first powerhouse project, finding no significant gaps in the application. This progress aligns with the U.S. Department of Energy’s pilot program aimed at accelerating advanced reactor development. These initiatives highlight the increasing intersection of technology and energy sectors, with companies like Microsoft playing a pivotal role.
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