Shares of Microsoft (MSFT 0.20%) rallied Thursday morning, climbing as much as 3.1%, despite a downturn in the broader market. As of 1:59 p.m. ET, the stock was still up 2.4%.
The catalyst that sent the tech giant higher was commentary issued by a Wall Street analyst suggesting the latest version of Copilot will boost Microsoft's cloud growth.
NASDAQ: MSFT
Key Data Points
Security Copilot
Microsoft just announced that its Copilot for Security will be generally available beginning April 1. This latest addition to the company's lineup of generative AI assistants "will help security and IT professionals catch what others miss, move faster, and strengthen team expertise." The system has been trained on threat intelligence to help guard against unauthorized intrusions.
Analysts at Wells Fargo believe this latest offering will result in incremental growth for Azure, Microsoft's cloud infrastructure service, during its fiscal fourth quarter (which ends Jun. 30) and into fiscal 2025. The analysts cite the service's consumption-based pricing, which they believe will drive greater adoption. The analysts maintained their overweight (buy) rating and price target of $460, which represents roughly 11% upside potential compared to Wednesday's closing price.
Is Microsoft stock a buy?
Microsoft has moved quickly to capitalize on the opportunity represented by generative AI. The company has integrated AI into a broad cross-section of its widely used suite of productivity tools while launching a growing number of industry- and job-specific Copilots.
Evercore ISI analyst Kirk Materne recently updated his estimates, suggesting Microsoft's generative AI efforts could generate between $83 billion and $143 billion in incremental revenue by 2027.
Microsoft stock is currently selling for 36 times forward earnings, which is a bit of a premium compared to a valuation of 28 for the S&P 500. That said, given the opportunity represented by AI and the company's pole position in the space, I'd argue that Microsoft is a strong buy.
