Microsoft stock price target raised to $640 from $625 at Evercore ISI

Investing.com - Evercore ISI has raised its price target on Microsoft (NASDAQ:MSFT) to $640.00 from $625.00 while maintaining an Outperform rating on the stock. Microsoft currently trades at $541.55 with a market cap of over $4 trillion, trading at a P/E ratio of 39.5 and near its 52-week high of $555.45. According to InvestingPro data, the stock appears slightly overvalued based on its Fair Value assessment.

The firm highlighted Microsoft’s "very impressive quarter" with strong demand for Azure and cloud services, despite the stock declining slightly in after-hours trading. Azure delivered 39% growth in the most recent quarter, with guidance of 37% growth for the fiscal second quarter, which Evercore deemed "unbelievably impressive" considering demand is running ahead of capacity.

Commercial bookings increased by 111% and commercial remaining performance obligation (RPO) grew 51% to $392 billion, providing enhanced visibility into future Azure growth. The firm noted these figures exclude the impact from the incremental Azure commitment with OpenAI announced earlier this week.

Evercore pointed to Microsoft’s capital expenditure increase to $34.9 billion from $24.2 billion as a positive indicator that "demand is accelerating." The firm also highlighted the OpenAI announcement as removing uncertainty for Microsoft shareholders while offering increased optionality in terms of API revenue and OpenAI equity stake.

The Productivity and Business Processes (PBP) revenue growth remained solid at 14% in constant currency, with E5 and Copilot continuing to drive average revenue per user growth, according to Evercore’s analysis.

In other recent news, Microsoft reported a 39% constant-currency growth in its Azure cloud services for the most recent quarter. This performance slightly exceeded guidance by two percentage points, though it was at the lower end of investor expectations. Truist Securities maintained a Buy rating on Microsoft, highlighting the impressive performance across all segments, with commercial bookings increasing 111% year-over-year in constant currency. Wells Fargo raised its price target for Microsoft to $700, citing strong Azure performance as a driving factor. Conversely, Stifel and Raymond James both lowered their price targets to $640 and $600, respectively, due to concerns about Azure capacity issues and increased capital expenditure expectations. BMO Capital also reduced its price target to $625, noting that Azure’s growth, while strong, fell short of some buy-side expectations. Despite these varied assessments, Microsoft’s Azure service remains a focal point for analysts, with its growth figures drawing significant attention.

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