Microsoft CEO Satya Nadella embraces AI and OpenAI.
Profits from artificial intelligence could add Microsoft to Apple in the elite stock category with a market capitalization of over $3 trillion.
That’s according to Morgan Stanley analysts, who said the company’s new price target of $415 would imply a valuation of about $3.1 trillion. Analysts led by Keith Weiss named Microsoft as the frontrunner among big software companies, saying it is well-positioned to benefit from the growth of AI in the space.
“Generative AI aims to greatly expand the range of business processes that can be automated by software,” Weiss wrote in a note. “Microsoft is best positioned in the software space to monetize its expansion.”
Market frenzy for all things AI has sent Microsoft stock soaring this year. Microsoft-backed startup OpenAI Inc. has fueled a lot of excitement in the viral success of his ChatGPT tool. Microsoft is currently looking to completely revamp its entire line of Office apps, including Excel, PowerPoint, Outlook and Word, with OpenAI technology.
Weiss said the stock is up 42% this year, but the valuation is “still reasonable.” The stock’s so-called PEG ratio, or the price-to-earnings ratio divided by expected earnings growth, “is still in line with historical averages despite its unrivaled generative AI positioning,” he wrote. ing. The PEG ratio is a metric often used by growth-focused investors.
Weiss raised his price target to $415 from $335. This is the second highest among analysts surveyed by Bloomberg, after Redburn’s $450 target. Morgan Stanley has been Overweight Microsoft since early 2016, during which the stock has risen more than 500%.
The rest of Wall Street is also overwhelmingly bullish on the stock, with 52 analysts rating the stock “buy” or equivalent. Still, only three of them have price targets that suggest Microsoft could hit a historic $3 trillion market cap by next year, according to data compiled by Bloomberg. Microsoft shares rose 0.9% on Thursday.
Apple last month made Wall Street history as the first company with a market value of over $3 trillion.
