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Morgan Stanley raises Microsoft shares target on Cloud and GenAI strength

EditorEmilio Ghigini
Published 11/04/2024, 10:00
© Reuters.

On Thursday, Morgan Stanley displayed confidence in Microsoft Corporation's (NASDAQ:MSFT) shares, by raising its price target on the tech giant's shares to $520, up from the previous $520. The firm has maintained an Overweight rating on the stock, signaling optimism about the company's prospects.

The adjustment in the price target reflects Morgan Stanley's positive outlook on Microsoft's robust positioning in key areas of technological growth, particularly in Cloud services and generative AI. According to the firm, these sectors are among the core secular growth drivers in the technology industry.

Morgan Stanley highlighted Microsoft's operational efficiency as a factor contributing to its strong financial forecasts. The firm anticipates a compound annual growth rate (CAGR) of 14% in revenue over the next five years, accompanied by a 16% CAGR in earnings per share (EPS).

The anticipated durability in EPS growth is expected to support the valuation of Microsoft's shares, keeping it in line with its industry peers. This projection underpins Morgan Stanley's increased price target and reaffirms the Overweight rating, suggesting that Microsoft's stock could outperform the average returns of other companies in the sector.

InvestingPro Insights

Microsoft Corporation's (NASDAQ:MSFT) financial strength and market performance continue to be a focal point for investors. With a robust market capitalization of $3.15 trillion, the tech behemoth showcases its prominence in the industry. Despite trading at a high earnings multiple with a P/E ratio of 38.06, reflecting a premium valuation, Microsoft's revenue growth remains solid at 11.51% over the last twelve months as of Q1 2023. This growth is further emphasized by a significant quarterly revenue increase of 17.58% in Q1 2023.

InvestingPro Tips highlight Microsoft's consistency in rewarding shareholders, having raised its dividend for 18 consecutive years and maintaining dividend payments for 22 years. The company's stock is noted for its low price volatility, a trait that might appeal to risk-averse investors. For those interested in deeper analysis, InvestingPro offers additional tips on Microsoft's financial metrics and stock performance. Using coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to gain access to a total of 19 InvestingPro Tips for Microsoft, including insights on profitability, debt levels, and valuation multiples.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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