Wall Street analysts are standing by Microsoft even after the company’s somewhat mixed quarterly report. The tech behemoth posted adjusted fiscal fourth-quarter earnings of $2.69 per share and $56.19 billion in revenue. That beat a Refinitiv consensus estimate of $2.55 earnings per share on revenue of $55.47 billion. Still, the stock traded more than 3% lower in the premarket after Microsoft issued fiscal first-quarter guidance that fell short of expectations . On top of that, Azure cloud revenue grew by 26% year over year, down from 27% in the previous quarter. MSFT 1D mountain MSFT falls after earnings But analysts think the stock can march on higher given the company’s leadership in artificial intelligence, among other drivers. “Holding a solid leadership position ahead of a large AI-driven tech cycle, Microsoft stands well positioned for durable double-digit EPS growth over multiple years,” Morgan Stanley analyst Keith Weiss wrote on Wednesday. “While investors may bristle over a lack of hand holding into FY24, we remain confident MSFT remains the long-term leader in AI.” Weiss reiterated an overweight rating on Microsoft stock with a $415 per share price target, which implies 18% upside from Tuesday’s close. JPMorgan’s Mark Murphy was similarly optimistic after Microsoft’s earnings, and reiterated an overweight rating with a $385 per share price target, or nearly 10% above the previous closing level. “While MSFT shares are valued at a premium on a P/E basis, we believe this premium is warranted based on faster recent organic revenue growth, robust FCF generation, a relatively stronger position within the enterprise, and our belief that Microsoft has pulled ahead of the pack with a state-of-the art cloud platform,” Murphy said. Microsoft trades at a forward price-to-earnings ratio of 31, well above the S & P 500’s multiple of 21. Meanwhile, Goldman Sachs analyst Kash Rangan noted that while Azure revenue growth was stabilizing, he highlighted the contributions generative artificial intelligence is making to the segment’s maturation. He reiterated a buy rating on the stock with a $400 per share price target, or roughly 14% upside. “Microsoft is in the unique position to transform the way software augments human productivity as it showcases the value it can drive in synthesizing, creating, and sharing information across a variety of different use cases,” Rangan said. Bank of America’s Brad Sills also reiterated a buy rating on Microsoft stock, albeit with a higher $405 per share price target which equates to 15% upside. “Though Azure growth was below our upside case, we view the high end of the guidance as solid in an environment where optimization headwinds do not appear to be abating,” Sills said. Citi’s Tyler Radke maintained a buy rating on Microsoft with a $425 price target, or about 21% upside from Tuesday’s close. The analyst highlighted contributions from artificial intelligence this quarter as well as Microsoft’s Co-Pilot. He noted, however, that integrating chat capabilities into Microsoft’s search engines will take time to fully play out. Wells Fargo’s Michael Turrin said that Microsoft’s fiscal fourth quarter results were “in line with no major fireworks” and reiterated an overweight rating with a $400 per share price target, or 14% upside. “Even after having become one of the largest companies on the planet, we still see a bright future ahead for Microsoft, driven by continued growth prospects in huge categories of IT spend,” Turrin said. — CNBC’s Michael Bloom contributed reporting.
