'…One of the Long-Term AI Winners in Software': Microsoft Stock (NASDAQ:MSFT) Notches Up With Oppenheimer Praise
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The word came from Oppenheimer analyst Brian Schwartz, who has a five-star rating on TipRanks. Schwartz upgraded Microsoft from Perform to Outperform, and also set a $600 price target on Microsoft stock. That implied a roughly 21% upside potential against the closing price on Tuesday. The biggest reason for this is that Microsoft stands to gain substantially from artificial intelligence (AI) thanks to its current partnership with OpenAI, parent of ChatGPT. Microsoft also has its own AI system, Copilot, which should also help.
But Schwartz notes that it is not just AI that will drive Microsoft forward. Its growth in Azure is also likely to remain strong, serving as a potent competitor to Amazon (AMZN) and its Amazon Web Services ecosystem. Moreover, Schwartz notes, the sheer power of Microsoft's growth in this sector is not yet fully reflected in the share price, so there is a substantial potential win afoot.
Game Pass is Too Profitable!
Yesterday, we had a report come in that noted that Microsoft's Game Pass was 'unsustainable.' Not everyone, however, agrees with that assessment. In fact, depending on how you look at the numbers—and what numbers you refuse to look at—Game Pass might actually be profitable. Reports noted that Microsoft has specifically said it does not factor in 'first-party sales cannibalization.'
This means, essentially, that games made available on Game Pass are basically hurting game sales. Fewer people are opting to buy the games directly when they can simply play said games through Game Pass for the monthly subscription fee instead. Indeed, Microsoft noted that, for Doom: The Dark Ages, it reached the three million player mark fully seven times faster than Doom Eternal did. This suggests some cannibalization at work, as Doom: The Dark Ages ' numbers on Steam were less than inspiring. However, reports note that Microsoft has some noteworthy accounting tricks for how it factors in that cannibalization, which make Game Pass look better for Microsoft.
Is Microsoft a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 31 Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 6.51% rally in its share price over the past year, the average MSFT price target of $527.37 per share implies 5.21% upside potential.
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