Microsoft stock rating reiterated at Buy by Stifel amid Azure growth expectations

Investing.com - Stifel has reiterated its Buy rating and $650.00 price target on Microsoft (NASDAQ:MSFT) stock, according to a research note released Friday. The tech giant, currently trading at $520.56, maintains a robust market capitalization of $3.87 trillion and appears overvalued according to InvestingPro models.

The firm noted that despite Microsoft delivering what it called a "near perfect-print" last quarter, with Azure exceeding expectations by 400 basis points and EPS beating by 700 basis points, the stock subsequently lost momentum and has underperformed the IGV index by approximately 5 percentage points. The company maintains impressive fundamentals with a 68.8% gross profit margin and 14.9% revenue growth over the last twelve months.

Stifel identified several factors that could help Microsoft stock regain momentum, including another strong Azure performance, sustained operating margin momentum, and insights into the company’s OpenAI relationship.

Based on investor conversations, Stifel reported that buy-side expectations call for Azure to beat estimates by at least 300 basis points (40%+ year-over-year in constant currency) and for Microsoft to guide fiscal second-quarter 2026 constant currency growth at approximately 37-38%.

The firm expressed confidence in management’s ability to leverage Microsoft’s increasingly capital expenditure-centric business model, which should limit operating expense growth to low single digits and drive mid-teens EPS growth in coming quarters and years. With the next earnings report due on October 29, investors can access comprehensive analysis and 17 additional key insights through InvestingPro’s detailed research reports.

In other recent news, Microsoft is anticipated to slightly exceed revenue expectations in its upcoming fiscal first quarter report, as noted by Guggenheim, which maintained a Neutral rating on the stock. UBS has maintained its Buy rating and a $650 price target for Microsoft, highlighting the positive momentum in its Azure cloud business, with expected revenue growth of 39% for the quarter. Microsoft CEO Satya Nadella received a $96.5 million pay package for fiscal 2025, marking his highest compensation since becoming CEO, attributed to significant advancements in artificial intelligence.

Additionally, Microsoft has decided to exempt many sales roles from its return-to-office mandate, adopting a more flexible approach compared to other tech companies, according to a Bloomberg report. In other industry news, OpenAI has acquired Software Applications Incorporated, the creator of Sky, a natural language interface for Mac computers. This acquisition aims to enhance AI integration with user applications for tasks such as writing, planning, and coding. These developments reflect the ongoing strategic and operational shifts within these leading tech companies.

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