Stifel Upgrades Microsoft to Buy, $575 PT
Stifel analyst Brad Reback upgraded Microsoft (NASDAQ: MSFT) from Hold to Buy with a price target of $575 (from $530).
“Upgrade to Buy and increase TP to $575.
We are increasingly comfortable with the company’s ability to sustain mid/upper teens revenue growth as open-weight model advancement has boosted management’s LLM agnostic strategy (Azure & Copilot), COGS/OPEX operational efficiencies are supportive of stable operating margins and strong cash-flows should limit the company’s need for outside financing.
Within Azure, even in the face of capacity constraints, we expect accelerating revenue growth driven by incremental operational efficiencies, ramping new datacenter capacity and a growing OAI revenue share.
For M365, product improvements should enable sustained strong Copilot adoption and, when combined with growing GitHub consumption, we believe this should support mid/upper teens growth.
Post our gross-margin concerns earlier this year, it is now increasingly evident that Azure operational efficiency efforts, elimination of payments to OAI post the April contract revision, disciplined capex spending and focused opex growth should enable Microsoft to sustain current operating-margins.”
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