Microsoft stock price target raised to $655 from $640 at TD Cowen

Investing.com - TD Cowen raised its price target on Microsoft (NASDAQ:MSFT) to $655 from $640 while maintaining a Buy rating following the company’s strong first-quarter results. The new target represents potential upside from Microsoft’s current trading price of $529.48, though InvestingPro data indicates the stock is trading slightly above its Fair Value. Microsoft currently commands a market capitalization of $3.94 trillion, making it a prominent player in the software industry.

Microsoft reported approximately 17% constant currency revenue growth, significantly exceeding Street expectations of about 14%. This outperformance aligns with the company’s 14.93% revenue growth over the last twelve months, reaching $281.72 billion. Azure cloud services grew 39% in constant currency, which was 2 percentage points above consensus estimates but flat quarter-over-quarter.

TD Cowen noted that capacity constraints, not demand, are limiting Azure’s growth, with demand actually accelerating. The firm highlighted that Microsoft’s remaining performance obligations (RPO) grew 51% compared to 35% in the previous quarter and is expected to reach triple-digit growth next quarter, boosted by the recent $250 billion OpenAI deal. This growth trajectory supports Microsoft’s strong financial health score of 3.12 (rated "GREAT" by InvestingPro), with particularly high marks for profitability (4.26/5) and price momentum (3.82/5).

Microsoft achieved a record 49% operating margin in the quarter, which TD Cowen attributed to well-managed cost of goods sold and operating expenses. The company maintains an impressive 68.82% gross profit margin over the last twelve months. Despite these strong results, Microsoft shares fell approximately 4% in after-hours trading due to Azure’s lack of acceleration and management comments about supply constraints.

TD Cowen believes Azure can maintain "durable upper 30% growth through FY26 and into FY27 as supply bottlenecks unlock," and values Microsoft at approximately 34 times FY27 estimated price-to-earnings. Currently, Microsoft trades at a P/E ratio of 39.52, which InvestingPro identifies as high relative to near-term earnings growth. Analysts remain overwhelmingly bullish with a consensus recommendation of 1.26 (Strong Buy) and price targets ranging from $483 to $710. For investors seeking deeper insights, Microsoft is among 1,400+ US equities covered by comprehensive Pro Research Reports that transform complex data into actionable intelligence.

In other recent news, Microsoft reported Azure cloud growth of 39% in constant currency for the first fiscal quarter, which met the company’s guidance but fell short of investor expectations of 40% or higher. Despite this, analyst firms such as Piper Sandler, KeyBanc, and Oppenheimer maintained positive ratings on the stock, with Piper Sandler setting a price target of $650.00 and KeyBanc reiterating a $630.00 price target. Oppenheimer also kept an Outperform rating, noting strong growth in Azure and other Cloud Services revenue. However, capacity constraints in Microsoft’s Azure cloud business remain a concern, as highlighted by KeyBanc and Guggenheim, the latter of which maintained a Buy rating with a $586.00 price target. Guggenheim had previously upgraded Microsoft based on Azure’s traction and anticipated adoption of Microsoft 365 Commercial Copilot. Evercore ISI raised its price target for Microsoft to $640.00 from $625.00, citing a "very impressive quarter" despite the slight stock decline in after-hours trading. The firm noted strong demand for Azure and cloud services, with guidance of 37% growth for the next quarter.

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