Microsoft (NASDAQ:MSFT) gained Friday after UBS upgraded the tech stock to buy from neutral. The Wall Street firm said the recent weakness in the stock, which is a major artificial intelligence play, is an opportunity for investors. UBS also hiked the price target to $400, implying more than 16% upside. Microsoft is higher by 42% this year.
Analyst Karl Keirstead raised his rating on Microsoft shares to buy from neutral and boosted his per-share price target to $400 from $345, noting that there has been evidence that spending for both Azure and Amazon’s (NASDAQ:AMZN) AWS have started to stabilize after a “significant” deceleration over the past year.
“Our latest round of checks suggest the backdrop remains tough but is no longer deteriorating – the worst may be behind us,” Keirstead said of the cloud environment, citing that some partners said new bookings were “slowly recovering.”
“Net, we raise our Azure estimates for 4Q/Jun and beyond.”
Keirstead pointed out that while Microsoft has benefited from a lot of enthusiasm surrounding AI – with the stock up more than 40% year-to-date – it could reap further gains with Azure’s revenue growth rate rising from more AI workloads and the pending Microsoft 365 Copilot monetization announcement, which could be as much as $10 to $15 per seat.
Analysts are largely cautious on Microsoft. It has a “Hold” rating from Seeking Alpha authors, while Wall Street analysts rate it a “Buy”. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates MSFT a “Hold”
The tech giant jumped $6.28, or 1.8%, to $348.94.