Over the years, Microsoft (NASDAQ:MSFT) has been in an ongoing tussle with its tech giant peer Apple (NASDAQ:AAPL), as both have vied for the title of the World’s Most Valuable Company. Now, Microsoft holds a slight edge, bolstered by its strong positioning in the AI segment – an area into which Apple has only recently made significant strides.
Regardless of the battle for supremacy between the pair, according to New Street analyst Pierre Ferragu, there’s every reason to believe Microsoft will keep on delivering the goods.
“Generative AI or not, Microsoft is a good place to be,” said the 5-star analyst. “The recent transformation will continue to bear fruits, while generative AI presents more further opportunities than risks.”
Microsoft is a company that has been enormously successful and that has been reflected in the shares’ performance. Over the past decade, its stock’s value has increased twelvefold. Meanwhile, during this period, revenues have tripled, while EPS has quadrupled, as its earnings multiple has grown from approximately 11 to around 33, expanding threefold.
While the software segment has featured plenty of success stories, suggesting such growth might not be so unique, Ferragu notes that Microsoft has “nevertheless outperformed its peer-group average on all dimensions.”
The analyst attributes this to the company’s superb execution on two fronts: “Microsoft first enhanced existing franchises with cloud-based features and monetized it, moving to subscription,” Ferragu explained. “Secondly, the company leveraged its exceptional go-to-market and ecosystem advantages to democratize Cloud services, achieving the Nirvana of execution: higher profitability combined with rapid and steady market share gains.”
While past performance does not guarantee future results, Microsoft appears well-positioned for continued success, particularly with its advancements in Generative AI technology. With a strategic partnership with OpenAI, the creator of ChatGPT, currently the “strongest technology platform” in the game, Microsoft is poised to monetize generative AI across its “very well-protected” product lines. Early indicators suggest Microsoft could see significant revenue growth from generative AI in the coming years, according to Ferragu.
So, good news for Microsoft but what does it all mean for investors? Ferragu rates MSFT shares as a Buy with a price target of $570. Should the figure be met, investors will be pocketing returns of ~29% a year from now. (To watch Ferragu’s track record, click here)
The Street features almost exclusively MSFT bulls. Barring one Hold, all 33 other recent analyst ratings are positive, making the consensus view here a Strong Buy. The average price target currently stands at $498.29, offering potential one-year gains of 12.5%. (See Microsoft stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
