Microsoft Corp (NASDAQ: MSFT) has underperformed relative to its peers since early May and that creates an opportunity to buy a quality name at an attractive price, as per a UBS analyst.
Microsoft stock has about a 17% upside
On Friday, Karl Keirstead raised his rating on the tech behemoth to “buy” and gave a boost to his price objective as well to $400.
For the year, Microsoft stock is already up more than 40%. But the analyst is convinced that it’s well-positioned to capitalise on rapid growth in artificial intelligence – and that warrants a higher multiple.
Near-term AI catalysts as well as material underperformance in the stock since May 1st, make the set up too attractive to maintain a neutral view of the stock.
Microsoft Corp is scheduled to report its fourth-quarter financial results on July 25th.
AI could be a material benefit for Azure
Keirstead agreed that Azure – the cloud computing business of Microsoft Corp is not entirely out of the woods yet but said the worst is likely in the past now.
The UBS analyst expects A.I. to be a material benefit for that segment in terms of revenue growth. To that end, he raised his fourth-quarter estimates for the cloud unit on Friday.
We upgrade Microsoft stock to buy from neutral on evidence that Azure/AWS cloud infrastructure spend is beginning to stabilise after a significant deceleration over the past year.
Earlier this week, a U.S. federal judge rejected the FTC’s request for an injunction to stop Microsoft from buying Activision Blizzard (find out more). The Federal Trade Commission took the matter to appeals court this morning, though.
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