Stocks to buy

Insider Scoop: Why Wall Street Sees Microsoft Stock Soaring Higher

Microsoft stock (NASDAQ:MSFT) continues to rollout new artificial intelligence features that will drive its earnings and stock higher in the coming months and years.

Microsoft stock currently has a “strong buy” rating based on the views of 35 Wall Street analysts who track the company’s progress. The average price target on Microsoft’s shares is $474.08, which is 12% higher than where the stock currently trades. It’s also worth noting that the lowest target on Microsoft stock right now is $440.00, which is 4% higher than the current share price of $421.90. This is all to say that even though Microsoft’s stock has risen 48% in the last 12 months, Wall Street sees more gains ahead.

New AI Features

Microsoft is working overtime to rollout new AI features that it can monetize to drive future earnings growth. In recent days, the company announced plans to introduce new AI tools for use with its Windows operating system and its cloud-computing infrastructure. Details of the new AI features will be unveiled at Microsoft’s annual “Build” conference in May. But buzz is growing, especially around the addition of AI to Microsoft’s highly profitable and fast-growing Azure cloud-computing platform.

The tech giant reportedly plans to offer new features related to AI safety, which will aim to lower the likelihood of chatbots posing security risks. Additionally, Microsoft plans to announce a new advanced Paste feature for Windows that will allow people to run AI models directly on their personal computer (PC). Earlier this year, Microsoft introduced Surface PCs that feature a Copilot button for quick access to the AI chatbot. An advanced Copilot is also expected to be unveiled at the upcoming May conference.

Investments and Earnings

Beyond new products, Microsoft has been expanding its leadership in AI in other important ways. The company just announced an investment of $2.90 billion over the next two years to enhance its AI business in Japan. The money, which is Microsoft’s biggest investment ever in Japan, will go towards the development of advanced AI semiconductors at two facilities in the Asian country. Microsoft also plans to allocate funds towards an AI reskilling program and establish a new AI lab in Tokyo focused on machine learning.

While still early days, the AI advancements are starting to have a positive impact on Microsoft stock and earnings. Microsoft’s most recent financial results beat Wall Street expectations on the top and bottom lines. The company reported earnings per share of $2.93 versus $2.78 that had been forecast among analysts. Revenue amounted to $62.02 billion compared to $61.12 billion that was expected on Wall Street. The company’s sales increased 17.6% year-over-year in what was the fourth quarter of 2023.

The company noted in the print that revenue from its cloud segment grew 30% from a year earlier. Management said that Microsoft now has 53,000 Azure AI customers, and the number of commitments to spend more than $1 billion on Azure cloud services in the year ahead increased during Q4. Microsoft reports its earnings for this year’s first quarter on April 23.

Buy Microsoft Stock

Analysts are extremely bullish on Microsoft and its future growth prospects. The company remains at the front of the pack when it comes to AI, rolling out new products and features that it can monetize and making strategic investments around the world. Beyond AI, Microsoft is achieving huge growth from its Azure cloud-computing platform. Financial results are also being lifted by strength in video games through the Xbox unit and the traditional software segment. For all of these reasons, Microsoft stock is a buy.

On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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