Morgan Stanley raises Microsoft target price to $582.00 from $530.00

Morgan Stanley raises Microsoft target price to $582.00 from $530.00

Morgan Stanley has significantly increased its price target for Microsoft (NASDAQ:MSFT) stock, raising it from $530.00 to $582.00 while maintaining an Overweight rating. This upgrade reflects the investment firm's confidence in Microsoft's financial performance and future prospects [1].

Microsoft's strong operating margins and robust revenue growth have been key drivers for this upward revision. The company's operating margins for fiscal year 2025 (FY25) reached 45.6%, up by 100 basis points from the previous year, and have expanded by 350 basis points over the past three years. This impressive margin performance is supported by a gross profit margin of 69.07% and a strong revenue growth rate of 14.13% over the last twelve months [1].

Microsoft's cloud and AI businesses have been particularly strong contributors to this financial performance. The company's More Personal Computing revenues grew by 9% year-over-year, while operating income jumped by 33% in FY25. Despite increased capital expenditures and growing cloud revenue contributions, Microsoft's gross margins remain 100 basis points higher than FY20 levels [1].

Morgan Stanley attributes Microsoft's margin improvements to several factors, including enhanced efficiency in lower-margin businesses like Azure, extended useful life of infrastructure, and optimization of lower-growth areas to fund higher-growth segments of the portfolio. Additionally, Microsoft's strong fourth-quarter earnings for FY25, which exceeded Wall Street expectations, further bolster the case for the higher price target [1].

Recent analyst upgrades from other firms, such as Barclays and KeyBanc, also support the positive outlook for Microsoft. Barclays raised its price target for Microsoft to $625, while KeyBanc upgraded its stock rating to Overweight, citing significant growth in the Azure cloud segment [1].

Overall, the combination of strong financial performance, positive analyst ratings, and Microsoft's robust growth prospects has led Morgan Stanley to raise its price target for the tech giant. Investors should closely monitor Microsoft's future earnings reports and analyst ratings to stay informed about the company's ongoing performance and potential future price movements.

References:
[1] https://www.investing.com/news/analyst-ratings/morgan-stanley-raises-microsoft-stock-price-target-to-582-on-durable-margins-93CH-4162140