Morgan Stanley cuts Microsoft stock price target to $530

On Thursday, Morgan Stanley (NYSE:MS) analysts, led by Keith Weiss, adjusted the price target for Microsoft (NASDAQ:MSFT) shares, reducing it to $530 from the previous $540, while maintaining an Overweight rating on the stock. Currently trading at $442.33 and near its 52-week high of $468.35, InvestingPro analysis indicates Microsoft is fairly valued. Weiss’s commentary highlighted a mixed sentiment among investors regarding Microsoft’s short-term earnings potential and its positioning in the rapidly evolving AI landscape, with 11 analysts recently revising their earnings expectations downward.

The revised price target comes amid concerns about various challenges Microsoft may face. These include increased foreign exchange headwinds, gross margin pressures, potential losses associated with OpenAI, and impairment charges related to Cruise. Despite these challenges, InvestingPro data shows Microsoft maintains robust financials with a 69.35% gross profit margin and an overall Great financial health score. Additionally, questions have been raised about the timing and significance of AI revenue contributions in fiscal year 2025, given current uncertainties around the capacity expansion of Azure and the adoption trends of Microsoft 365 Copilot.

Weiss also pointed to structural issues that could impact Microsoft’s competitive edge. The evolving partnership with OpenAI and the unexpected development of DeepSeek, which could potentially change the economics of AI, are central to these concerns. Despite these factors, the Overweight rating suggests that Morgan Stanley still sees long-term value in Microsoft’s stock.

The concerns reflect broader industry-wide issues as companies grapple with macroeconomic headwinds and the pace of technological change. Microsoft’s relationship with OpenAI, in particular, has been a point of interest for investors, especially with the growing prominence of AI technologies and their potential impact on future revenue streams.

The adjustment in Microsoft’s price target by Morgan Stanley signals a cautious but optimistic outlook for the tech giant as it navigates through these challenges. With a market capitalization of $3.29 trillion and strong revenue growth of 16.44% over the last twelve months, Microsoft remains a dominant force in the technology sector. The Overweight rating indicates a belief that Microsoft’s stock will outperform the average total return of stocks analyzed by the firm over the next 12 to 18 months. For deeper insights into Microsoft’s valuation and growth prospects, including over 30 premium financial metrics and expert analysis, visit InvestingPro. The reduction in the price target, however, acknowledges the hurdles that the company could face in the near term.

In other recent news, Microsoft remains a focal point for analysts with DA Davidson holding the tech giant at a Neutral rating with a $425 target, while BofA Securities maintains a Buy rating with a $510 target, and BMO Capital Markets revises its price target for Microsoft from $495 to $490 due to concerns about Azure’s performance. These recent developments reflect the analyst firms’ varied outlooks on Microsoft’s potential.

ServiceNow (NYSE:NOW) also garnered attention, with Citi maintaining a Buy rating on the stock and setting a $1,432 target. The company’s NOW-Assist/AI products have experienced rapid growth, with a 150% quarter-over-quarter increase in Annual Recurring Revenue (ARR), reaching approximately $250 million.

In partnership news, Euroclear announced a seven-year strategic collaboration with Microsoft to enhance its business ecosystem and technology infrastructure. The partnership aims to drive innovation through digital and data-centric initiatives, leveraging Microsoft’s cloud technologies and generative AI.

Lastly, Microsoft’s Azure Container Apps serverless GPUs are set to deploy the recently released DeepSeek-R1 AI model. This development is expected to streamline AI application development and deployment, offering more efficiency for users. These are some of the recent developments in the ever-evolving technology industry.

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