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Investing.com - Morgan Stanley (NYSE:MS) has raised its price target on Microsoft (NASDAQ:MSFT) stock to $582.00 from $530.00 while maintaining an Overweight rating. The tech giant, currently trading near its 52-week high with a market capitalization of $3.81 trillion, appears overvalued according to InvestingPro’s Fair Value analysis.
The firm cited Microsoft’s durable margins as a key factor in the upgrade, noting that the company ended FY25 with operating margins at 45.6%, up 100 basis points year-over-year, and has expanded operating margins by 350 basis points over the past three years. This impressive performance is reflected in Microsoft’s robust gross profit margin of 69.07% and strong revenue growth of 14.13% over the last twelve months.
Despite aggressive capital expenditure increases and growing cloud revenue contribution, Microsoft’s gross margins are currently 100 basis points higher than FY20 levels, according to Morgan Stanley’s analysis.
The research firm highlighted multiple factors contributing to Microsoft’s margin improvements, including enhanced efficiency in lower-margin businesses like Azure, extended useful life of infrastructure, and optimization of lower-growth areas to fund higher-growth segments of the portfolio.
Morgan Stanley also noted that Microsoft’s More Personal Computing revenues grew 9% year-over-year while operating income jumped 33%, and with headcount remaining flat exiting FY25 and management guiding to flat operating margins in FY26, this positive trend appears likely to continue.
In other recent news, Microsoft reported a strong performance in its fourth-quarter earnings for fiscal year 2025. The company exceeded Wall Street expectations with earnings per share of $3.65, surpassing the forecast of $3.37. Revenue reached $76.4 billion, beating estimates of $73.79 billion, driven by growth in its cloud and AI businesses. Following these results, Barclays (LON:BARC) raised its price target for Microsoft to $625, maintaining an Overweight rating. KeyBanc also upgraded Microsoft’s stock rating to Overweight, citing significant growth in its Azure cloud segment, which saw a 39% increase by the end of the fiscal year. This marks an eight percentage point increase over the second half of the year. These developments reflect positive momentum for Microsoft, as noted by both Barclays and KeyBanc.
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