Microsoft's current share price doesn't reflect AI upside, Oppenheimer says
Analyst Brian Schwartz raised his view to outperform from perform, saying the current share price of $496.62 doesn't fully reflect the upside potention Microsoft has with AI, even though shares have outperformed this year and are trading near records.
'Sustaining robust growth in its AI business is not fully in the stock, nor is a re-acceleration in Azure's growth in FY26,' he wrote, referring to the company's cloud-computing platform.
'Investors' attention on the ramp of Microsoft's AI revenue stream will only increase as Azure's growth remains strong,' he added. That will not only offer valuation support, but 'also upside potential as this revenue stream continues scaling fast and investors embrace Microsoft as one of the long-term AI winners in software.'
Microsoft shares rose 0.9% in premarket trading. They have jumped 40% off an April low, as of their last close, and the year-to-date advance of 18% easily eclipses the 8% gain of the Nasdaq 100 Index.
Oppenheimer issued a $600 price target on the stock, representing upside of more than 20% from Microsoft's last close. The average price target is a little under $530, indicating upside of about 6%.
With the upgrade, Oppenheimer joins a large cohort of bulls on the stock. Roughly 90% of the analysts tracked by Bloomberg recommend buying, while none have a bearish rating. –BLOOMBERG
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