Microsoft’s latest A.I. subscription is boosting Wall Street’s confidence in the software giant
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Analysts are turning more bullish on Microsoft and its artificial intelligence capabilities after the software giant revealed pricing for its A.I. subscription service. Shares closed at a record Tuesday after Microsoft revealed a $30 fee for its monthly Copilot offering, which adds AI capabilities to Microsoft 365. The company also shared a significant update to its Bing AI chatbot and said it would offer Meta Platform’s new large language model to Azure customers. The announcements led to a handful of Wall Street price target adjustments, as the company solidifies its dominance in the latest technology revolution consuming the investing community. Microsoft’s been at the forefront so far, with its multibillion-dollar investment in ChatGPT-maker OpenAI. “Consistent with our note … on a recent AI discussion held by Amy Hood, EVP & CFO at Microsoft, we reaffirm our extreme bullish-outlier viewpoint on Generative AI and walk away incrementally positive on Microsoft’s category leadership in AI as we believe it has reached ‘escape velocity’ in this market,” wrote JPMorgan analyst Mark Murphy in a Wednesday note to clients. The analyst has an overweight rating on the stock and raised his price target to $385 per share from $350. While the Copilot offering represents a “significant premium” to Microsoft 365 and came in higher than some analysts expected, Atlantic Equities’ James Cordwell views it as a sign of the company’s confidence in the product and demand. It also signals that Microsoft is well situated to capture value created through generative AI, he added. The analyst hiked his price target to $400 from $330. Bank of America analyst Brad Sills, meanwhile, upped his price target to $405 from $340 a share, reflecting nearly 13% upside from Tuesday’s close. The stock’s gained 50% this year on the promise of AI and a general rotation back into the once downtrodden technology sector. Sills expects AI workloads to contribute to solid Azure strength, forecasting 1% upside to fiscal fourth-quarter revenue estimates. He called Copilot’s ability to sort through business data a “critical differentiator” to currently available AI products. MSFT YTD mountain Microsoft shares in 2023 Deutsche Bank’s Brad Zelnick, meanwhile, estimates that every 1% penetration of Copilot should lift both revenue and EPS by 1% for Microsoft, and up Office 365 commercial revenue by 3%. “We believe copilot revenue is basically all upside to street numbers heading into this week and remain optimistic that over time copilots will be widely engrained in workflows to drive productivity and likely make M365 apps stickier and more valuable as they learn and make it easier to surface relationships and insights across a user’s Microsoft environment,” he wrote. — CNBC’s Michael Bloom contributed reporting
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