Microsoft’s (MSFT) stock “is likely range bound” for the time being says a top analyst at investment bank Stifel Nicolaus (SF).
Brad Reback, a top five-star rated analyst, says investors shouldn’t expect MSFT stock to takeoff anytime soon as the market assesses the technology giant’s heavy spending on artificial intelligence (AI), along with its decelerating cloud computing revenue.
Reback lowered his price target on MSFT stock to $475 from $515, while maintaining a Buy rating on the shares. The new price target implies 20% upside from Microsoft’s closing price on March 6. Reback wrote in a note to clients that he believes the stock is likely stuck where it is until the market gains confidence that the company’s cloud computing growth can run sustainably ahead of its capital expenditures.
Heavy AI Spending
The analyst goes on to say that investors and analysts have grown uncomfortable with the exorbitant amount of money Microsoft is spending on its AI buildout. Microsoft said in January that it plans on allocating $80 billion to various AI initiatives this year. Worries about capital expenditures have grown following the release of several cheap Chinese AI models in recent weeks.
At the same time, revenue from Microsoft’s cloud computing services, including its Azure unit, increased by 31% in the most recent quarter, down from 33% growth in the previous quarter. Reback wrote that investors are waiting to see revenue for Microsoft’s cloud business grow faster than its capital expenditures, and for now the company’s stock is bogged down.
MSFT stock has declined 6% so far in 2025.
Is MSFT Stock a Buy?
Microsoft’s stock has a consensus Strong Buy rating among 31 Wall Street analysts. That rating is based on 28 Buy and three Hold recommendations issued in the last three months. The average price target on MSFT stock of $507.54 implies 28.87% upside from current levels.
