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Investing.com - Scotiabank (TSX:BNS) raised its price target on Microsoft (NASDAQ:MSFT) to $650.00 from $500.00 on Thursday, while maintaining a Sector Outperform rating on the stock. The tech giant, currently trading at $513.24 and approaching its 52-week high of $518.29, maintains a strong "Buy" consensus among analysts with targets ranging from $432 to $700.
The firm cited Microsoft’s strong Azure cloud service performance, which grew 39% in the fiscal fourth quarter. Scotiabank noted that management expects a 37% constant currency rise in Azure for the first quarter of fiscal 2026, exceeding market expectations. This growth contributes to Microsoft’s impressive 14.13% year-over-year revenue increase, with InvestingPro data showing the company maintains a "GREAT" financial health score.
Scotiabank highlighted Microsoft’s partnership with OpenAI as a key advantage for Azure, with customer checks confirming strong demand. The bank also pointed to Microsoft’s higher-than-expected capital expenditure as evidence of robust underlying AI demand.
The firm raised its fiscal 2026 estimates, now modeling 13% total revenue growth and a similar increase in earnings per share. Scotiabank selected Microsoft in April as its "Top Pick Defensive Play" in software.
Microsoft’s position as a leading company in the AI revolution will drive sustainable fundamental growth that justifies a premium multiple, according to Scotiabank, despite the stock’s P/E ratio of 39.31x approaching the top of its 5-year valuation range. According to InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Discover comprehensive valuation metrics and 15+ additional ProTips with an InvestingPro subscription.
In other recent news, Microsoft reported impressive financial results, highlighted by a 39% year-over-year growth in Azure’s revenue for the fiscal fourth quarter. This performance exceeded expectations and was noted by several analysts as a key factor in their revised projections. BMO Capital increased its price target for Microsoft to $650, citing an impressive quarter, while Oppenheimer raised its target to $630, describing the results as excellent. Wolfe Research also adjusted its price target to $675, emphasizing the strong Azure growth that surpassed guidance. Additionally, Morgan Stanley (NYSE:MS) raised its price target to $582, pointing to Microsoft’s durable operating margins, which have expanded significantly over the past three years.
Meanwhile, the UK’s Competition and Markets Authority has expressed concerns over Microsoft’s and Amazon (NASDAQ:AMZN)’s dominance in the cloud computing sector. The regulator suggests that this dominance is harming competition and may require further investigation. The potential designation of strategic market status for these companies could lead to specific conditions being imposed on their operations. These developments reflect Microsoft’s continued influence and performance in the tech industry.
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