Wells Fargo Analyst Boosts Microsoft Price Target, Maintains Strong Buy Rating

Wells Fargo's Michael Turrin raised their price target on Microsoft (NASDAQ: MSFT) by 4.2% from $480 to $500 on 2024/04/26. The analyst maintained their Strong Buy rating on the stock.

Turrin highlighted Microsoft's impressive quarterly results, particularly noting the strong performance of Azure, bookings, and margin, after reviewing the company's Q3 2024 earnings report, which was released on April 25, 2024. The analyst also pointed out that strong demand for artificial intelligence (AI) prompted management to guide for double-digit revenue and operating income growth in FY 2025.

In Q3 2024, Microsoft reported earnings per share (EPS) of $2.94, surpassing the Zacks Consensus Estimate by 4.63% and marking a 20% increase compared to Q3 2023's $2.45. The company's revenue for the quarter stood at $61.86 billion, beating the Zacks Consensus Estimate by 2% and showing a 17% increase compared to Q3 2023's $52.86 billion.

Microsoft's segment revenues also demonstrated strong growth. The Productivity & Business Processes segment reported revenue of $19.6 billion, up 12% year-over-year (Y/Y). The Intelligent Cloud segment recorded revenue of $26.7 billion, representing a 21% Y/Y increase. The More Personal Computing segment generated revenue of $15.6 billion, showing a 17% Y/Y growth. Additionally, Microsoft's operating income reached $27.6 billion, marking a 23% Y/Y increase.

Looking ahead, Microsoft's management provided guidance for Q4 2024 and FY 2025. For Q4 2024, the company expects the following segment revenues: Productivity & Business Processes ($19.9 billion to $20.2 billion), Intelligent Cloud ($28.4 billion to $28.7 billion), and More Personal Computing ($15.2 billion to $15.6 billion). For FY 2025, Microsoft aims for double-digit growth in both revenue and operating income.

Chairman & CEO Satya Nadella expressed enthusiasm about Microsoft's AI capabilities, 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 & CFO Amy Hood also acknowledged the company's strong performance in the cloud sector, noting that Microsoft Cloud revenue reached $35.1 billion, up 23% Y/Y, thanks to the efforts of their sales teams and partners.

Other analysts also updated their ratings and price targets for Microsoft on April 26, 2024. Mark Moerdler from Bernstein raised their price target by 5.2%, from $465 to $489, and maintained their Buy rating on the stock. Kash Rangan from Goldman Sachs raised their price target by 14.4%, from $450 to $515, and maintained their Strong Buy rating. Mark Murphy from JP Morgan increased their price target by 6.8%, from $440 to $470, while also maintaining a Strong Buy rating.

It is worth noting that 100% of the top-rated analysts currently rate MSFT as a Strong Buy or Buy, with no analysts suggesting a Hold rating or recommending selling the stock.

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

Since Microsoft's latest quarterly report on April 25, 2024, the stock price has increased by 1.8%. On a year-over-year basis, the stock has gained 37.6%, outperforming the S&P 500, which has risen by 25.7% during the same period.

Wells Fargo analyst Michael Turrin, who raised the price target and maintained the Strong Buy rating, is ranked in the top 36% of Wall Street analysts by WallStreetZen. Turrin specializes in the Technology and Communication Services sectors and boasts an average return of 0.2% and a 47.4% win rate.

Microsoft Corporation, a global technology company, develops, licenses, and supports software, services, devices, and solutions. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Its offerings include popular products such as Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, Skype for Business, Skype, Outlook.com, OneDrive, LinkedIn, Dynamics 365, SQL, Windows Servers, Visual Studio, System Center, GitHub, Nuance, Azure, Surface, and Xbox, among others. Microsoft sells its products through various channels, including OEMs, distributors, and resellers, as well as digital marketplaces, online stores, and retail stores. Headquartered in Redmond, Washington, Microsoft was founded in 1975.

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