Microsoft's Stock Surge and 30% Growth Potential

Microsoft’s (NASDAQ: MSFT) stock has surged by 47% in the past year, yet an analyst foresees further potential for growth.

Brent Thill, an analyst at Jefferies, has released an updated report affirming a buy rating on the shares while increasing the price target from $465 to $550. Based on the current stock price, this adjustment indicates a potential upside of nearly 30% over the next 12 months.

Microsoft’s Positioning in the AI Landscape

In a recent note to clients Thill said, “We believe that Microsoft is the key beneficiary of Gen AI (generative artificial intelligence),” He added,” Microsoft is “poised to benefit from both infrastructure (Azure and OpenAI) and app angles (series of Copilots) opportunities, capturing the most of this transformational opportunity.”

Microsoft’s software and cloud services supremacy offers a clear path to launching and profiting from AI. However, valuation is important in determining a stock’s future returns.

Analysts predict the company’s earnings to reach $15.63 by fiscal 2026. If the stock maintains a forward price-to-earnings ratio of 36, it will trade at $562 during the next two years.

To meet the analyst’s price goal within the next year, Microsoft will need to either considerably outperform Wall Street projections or trade at a higher valuation. Investors should do well with the company in the long run.

Microsoft Splits Teams and Office 

In other developments, Microsoft said it is splitting the Teams business messaging and video app from its Office software globally.

The company announces that it will no longer sell Office 365 suites with Teams to new business subscribers. However, existing customers who choose to continue using the bundled products will still have access to them, even upon renewal.

Last year, the European Commission announced opening a formal investigation into Microsoft’s bundling of communication and collaboration software into its business software suites. Slack’s complaint in 2020, prior to its acquisition by Salesforce, sparked the investigation.

Splitting the programs aims to “enhance clarity for our customers,” stated a Microsoft spokesperson in an email.” This approach also responds to feedback from the European Commission by offering multinational companies greater flexibility in standardizing their purchases across different regions.

Microsoft said in a blog post that Teams Standalone will cost $5.25 (£4.20) for new customers.