MSFT Stock Gets A Price Target Cut, But Argus Still Sees Nearly 32% Upside

• Bonner said Microsoft continues to pursue long-term growth through sustained investments in artificial intelligence and cloud computing.
• The analyst pointed to CEO Satya Nadella's characterization of generative AI as a rare shift in the fundamental computing paradigm.
• Bonner acknowledged that market concerns over the scale of Microsoft’s AI-related spending have dogged the company’s shares over the past year.

Shares of Microsoft Corp. (MSFT) were in focus on Friday after Argus analyst Joseph Bonner updated his outlook on the software giant amid the company's continued push into AI and cloud computing.

According to TheFly, Bonner maintained a ‘Buy’ rating on Microsoft while trimming the price target to $510 from $620. The new price target implies an upside potential of nearly 32% from current levels.

Microsoft shares were up nearly 1% in Friday’s opening trade.

Why Argus Remains Bullish On MSFT

Bonner said Microsoft continues to pursue long-term growth through sustained investments in artificial intelligence and cloud computing, which he views as key drivers of the company's future expansion.

The analyst pointed to CEO Satya Nadella's characterization of generative AI as a rare shift in the fundamental computing paradigm.

“I’ve been thinking a lot about the future of the firm in an AI-driven economy. This transition is different than any previous platform shift,” Nadella said in a post on X last month. He also added that the company’s priority should be on building a frontier ecosystem, not just a frontier model.

Bonner also acknowledged that market concerns over the scale of Microsoft’s AI-related spending have dogged the company’s shares over the past year.

However, the analyst said those concerns are not reflected in Microsoft's financial performance, citing the company's continued revenue growth and healthy profit margins as evidence that its investment strategy remains on track.

DA Davidson Analyst Says Every Investment Dollar At MSFT Is Going Towards AI

DA Davidson's Head of Technology Research, Gil Luria, said during an interview with CNBC this week that every investment dollar at Microsoft is now going towards AI.

“AI drives more infrastructure software sales, then it drives more Office sales with Copilot. They have a much better place to invest right now. The gaming business doesn’t have much growth, so they might as well cut costs there in order to fund AI investment,” he said, after Microsoft laid around 4,800 employees, or 2.1% of its global workforce.

Luria echoed similar sentiments as Bonner, saying that investors are overlooking Microsoft's strengths by buying into two conflicting bear cases, one that AI will erode software demand and another that the company is overspending on AI infrastructure.

He disagreed with both arguments, saying Microsoft's software business remains resilient while AI investments continue to support accelerating growth.

What Retail Traders Think Of MSFT Stock

Retail sentiment on Stocktwits around Microsoft trended in the ‘bearish’ territory at the time of writing.

MSFT stock is down 20% year-to-date and 23% over the past 12 months. The S&P 500 ETF (SPY) is up 20% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 30%.

Also See: AMD Stock Is Up 155% This Year, But Stifel Sees A Further Upside Of 16% – What’s Driving The Optimism?

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