Goldman Sachs raises Microsoft stock price target to $550

On Tuesday, Goldman Sachs analyst Kash Rangan announced an increase in the price target for Microsoft Corporation (NASDAQ:MSFT) to $550, up from the previous $480, while reiterating a Buy rating on the stock. Currently trading at $458.87 with a market capitalization of $3.41 trillion, Microsoft enjoys strong analyst support, with 25 analysts recently revising their earnings estimates upward according to InvestingPro. The revision reflects Goldman Sachs’ updated valuation multiples and a strong endorsement of Microsoft’s recent advancements in artificial intelligence (AI).

Rangan’s confidence in Microsoft’s AI investments was bolstered following the Microsoft Build conference. The company’s AI initiatives are expected to contribute significantly to a forecasted $300 billion-plus in Microsoft Cloud revenue by the fiscal year 2029. This ambitious target builds upon Microsoft’s current strong performance, with revenue growing at 14.13% and maintaining a "GREAT" financial health score of 3.07 according to InvestingPro’s comprehensive analysis. Moreover, Rangan noted Microsoft’s more efficient capital expenditure profile as a positive development.

At the conference, Microsoft showcased AI enhancements that span its entire product stack, which included expanding developer access, deepening platform integration, and a commitment to an open agentic AI through the Model Context Protocol (MCP). These advancements are seen as solidifying Microsoft’s position at the forefront of the developer tool ecosystem, particularly as generative AI (GenAI) begins to see increased adoption.

Rangan highlighted several key developments from Microsoft that are poised to drive growth: the integration of MCP to set common development standards for agentic AI, the strong momentum of GitHub Copilot with more than 15 million developers, and the introduction of Copilot agent, which represents a significant leap forward. Additionally, the expanded capabilities of Copilot Studio for fine-tuning and orchestrating multiple AI agents, the emergence of Foundry as a foundation for open agentic web development, and the ongoing scaling of Azure, which now spans over 70 regions, were all noted as factors that reinforce Microsoft’s leadership position.

The analyst underscored that as GenAI shifts from infrastructure to platform and application layers, Microsoft stands to benefit from a transition to a more capital-efficient, high-margin recurring revenue model, mirroring the earlier transition from on-premises to cloud-based solutions. Trading at a P/E ratio of 35.21 and near its 52-week high of $468.35, InvestingPro’s analysis suggests Microsoft is currently trading above its Fair Value. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which provides detailed analysis of Microsoft’s valuation, growth prospects, and competitive position among the 1,400+ top US stocks covered.

In other recent news, Proofpoint (NASDAQ:PFPT), Inc. announced its plan to acquire Hornetsecurity Group for $1 billion, marking its largest acquisition to date. This strategic move aims to enhance Proofpoint’s security offerings, particularly for small and mid-sized businesses, by leveraging Hornetsecurity’s expertise in managed service providers. Hornetsecurity reports over $160 million in annual recurring revenue with more than 20 percent year-over-year growth. Meanwhile, Citi analysts have raised Microsoft’s stock price target to $540 from $480, maintaining a Buy rating. This adjustment follows Microsoft’s announcement of a 3% reduction in force and strong fiscal third-quarter results, with expectations of continued growth in its cloud computing service, Azure.

In other developments, the European Union is likely to accept Microsoft’s proposal to adjust the pricing of its Office product, resolving a long-standing antitrust issue. OpenAI has launched a new hub for safety evaluations of its AI models, aiming to enhance transparency and track model performance over time. The hub will share safety metrics and evaluation results, focusing on aspects such as harmful content and factual accuracy. These updates are part of OpenAI’s broader efforts to improve communication about AI safety.

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