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Investing.com - Stifel raised its price target on Microsoft (NASDAQ:MSFT) to $650 from $550 on Thursday, maintaining a Buy rating following the company’s strong fiscal year-end results. The tech giant, currently valued at nearly $4 trillion, is trading near its 52-week high with a P/E ratio of 41.5. According to InvestingPro analysis, the stock appears slightly overvalued at current levels.
Microsoft beat expectations across all metrics, with Azure cloud services growing 39%, which was more than 400 basis points above analyst projections. The company also demonstrated strong cost of goods sold (COGS) and operating expense efficiencies that drove profitability, maintaining an impressive gross profit margin of 69.1%. InvestingPro data shows the company’s overall financial health score is "GREAT," supported by strong profitability metrics.
While Microsoft’s OpenAI business continues to perform well, Stifel noted that much of the Azure upside resulted from accelerated cloud migrations among large enterprise customers during the quarter.
Capital expenditure reached $24 billion in the quarter, with management expecting it to increase to $30 billion in September. Stifel projects at least $120 billion in capital spending for fiscal year 2026 as Azure and AI demand continues to exceed supply.
Looking ahead, Microsoft management guided for double-digit full-year revenue growth with relatively stable operating margins, despite a mix shift toward lower gross-margin Azure workloads, as capital intensity and AI efficiencies should allow operating expense growth to trail revenue growth significantly.
In other recent news, Microsoft reported its fourth-quarter fiscal 2025 earnings, showcasing robust performance across its business segments. The company achieved total revenue of $76.4 billion for the quarter, marking a 17% year-over-year growth in constant currency, surpassing analyst expectations of $73.8 billion. A significant contributor to this success was Azure, Microsoft’s cloud computing service, which posted a 39% year-over-year growth, exceeding both the company’s guidance of 34.5% and market expectations. Following these results, several analyst firms have adjusted their price targets for Microsoft. Cantor Fitzgerald raised its price target to $639, while Mizuho (NYSE:MFG) increased it to $625, both maintaining positive ratings on the stock. Scotiabank (TSX:BNS) and BMO Capital also raised their price targets to $650, citing strong Azure performance as a key factor. Oppenheimer adjusted its target to $630, describing the quarter as "excellent" and noting signs of business acceleration. These developments highlight the positive market sentiment surrounding Microsoft’s recent performance.
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