Stifel Nicolaus Raises Microsoft (MSFT) Price Target to $475, Maintains Strong Buy Rating

Stifel Nicolaus's Brad Reback raised their price target on Microsoft (NASDAQ: MSFT) by 4.4% from $455 to $475 on 2024/04/26. The analyst maintained their Strong Buy rating on the stock.

In an assessment of Microsoft's Q3 2024 earnings report, the analyst highlighted the company's "appreciably accelerating Azure growth" as one of the key factors contributing to its strong performance. They also noted that Microsoft's collection of Infrastructure/Application assets positions the company as "a cashflow machine for years to come," giving it an advantage over its competitors in the AI sector.

For Q3 2024, Microsoft reported earnings per share (EPS) of $2.94, surpassing the Zacks Consensus Estimate by 4.63% and showing a 20% increase compared to Q3 2023. Revenue for the quarter was $61.86 billion, beating the Zacks Consensus Estimate by 2% and marking a 17% rise from the same period last year.

The company's segments also performed well, with the Productivity & Business Processes segment revenue reaching $19.6 billion, up 12% year-over-year (YOY). The Intelligent Cloud segment revenue grew by 21% YOY to $26.7 billion, while the More Personal Computing segment revenue increased by 17% YOY to $15.6 billion. Microsoft's operating income for Q3 2024 was $27.6 billion, experiencing a 23% YOY growth.

Looking ahead, Microsoft's management provided guidance for Q4 2024 and FY 2025. They anticipate Productivity & Business Processes segment revenue in the range of $19.9 billion to $20.2 billion for Q4 2024. The Intelligent Cloud segment is expected to generate revenue between $28.4 billion and $28.7 billion, while the More Personal Computing segment is projected to bring in $15.2 billion to $15.6 billion. Furthermore, Microsoft aims for double-digit growth in both revenue and operating income for FY 2025.

Chairman and CEO Satya Nadella expressed enthusiasm for Microsoft's AI transformation, stating, "Microsoft Copilot and the Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry." Executive VP and CFO Amy Hood attributed the strong performance to the company's sales teams and partners, highlighting that Microsoft Cloud revenue reached $35.1 billion in Q3 2024, a 23% increase YoY.

In addition to Stifel Nicolaus's Brad Reback, other analysts also provided updated ratings for Microsoft on April 26, 2024. Bernstein's Mark Moerdler raised their price target by 5.2% from $465 to $489, maintaining their Buy rating on the stock. Goldman Sachs's Kash Rangan raised their price target by 14.4% from $450 to $515, also maintaining their Strong Buy rating. JP Morgan's Mark Murphy increased their price target by 6.8% from $440 to $470, while maintaining their Strong Buy rating.

Interestingly, all of the top-rated analysts currently rate MSFT as a Strong Buy or Buy, with no analysts seeing it as a Hold. None of the analysts either recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Microsoft will deliver earnings per share (EPS) of $12.67 for the upcoming year. If the analysts' predictions hold true, this would represent a 9.3% increase in yearly EPS on a year-over-year basis.

Since the release of Microsoft's Q3 2024 report on April 25, 2024, the stock price has risen by 1.8%. In comparison, the stock has seen a substantial 37.6% increase year-over-year. Microsoft's performance has outpaced the S&P 500, which has risen by 25.7% during the same period.

Brad Reback, the Stifel Nicolaus analyst who raised the price target on Microsoft, is ranked in the top 8% of Wall Street analysts by WallStreetZen. With an average return of 8.1% and a 50% win rate, Reback specializes in the Industrials and Technology sectors.

Microsoft Corporation, a global software development, licensing, and support company, operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment offers various software and services, including Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business. The Intelligent Cloud segment licenses SQL, Windows Servers, Visual Studio, and Azure, among other products. The More Personal Computing segment focuses on Windows OEM licensing, Surface devices, gaming consoles, and search services. Microsoft's products are sold through various channels, including OEMs, distributors, and retail stores.

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