Loop Capital has reiterated its Buy rating on Microsoft Corporation (MSFT, Financial),which has a super-super-strong buy of $500, as we expect Microsoft to have great Q1 numbers for growth in cloud services and AI. With the slight improvement in IT expenses, growth was most noticeable in the third quarter, which fared better than the preceding quarters in the year. The firm is optimistic that spending will gain momentum up to and including the final quarter.
New cloud consumption rates, boosted by an enhancing IT spending environment and commencements of new cloud-based projects since the beginning of the year, have enhanced the optimism of the investment firm. Microsoft continues to have momentum in the cloud, and the Company’s ongoing cloud implementations and use of M365 Copilot should keep the trend going in the right direction for the near term but may not be immediately accretive to the business.
Moreover, Loop Capital’s focus was on increasing market awareness of the Microsoft analytics platform Fabric and shaking up the data lake and analytics market. As for Microsoft’s more conventional Windows business, AI-fueled PCs are anticipated to trigger a refresh cycle. Though the remainder of our growth is expected in 2025, we have moved up the expectations of a significant part of our growth from the second half of 2024.
More recently, in an environmental and operational leap, Microsoft has decided to purchase power for 20 years from Constellation Energy, seeking to reopen the Three Mile Island nuclear plant, now known as the Crane Clean Energy Centre. This four-year Java program worth $1.6 billion will also complement Microsoft’s approach to supporting its artificial intelligence push with carbon-free electricity.
Other optimists are also at Evercore ISI and KeyBanc, which presented strong MSFT fundamental market and Azure AI usage increases. KeyBanc also raised its estimates to $505. However, Piper Sandler reduced the target figure to $470 while sticking to an Overweight recommendation because of AI opportunities here. Since November this year, Microsoft intends to let customers create free-roaming AI agents through Copilot Studio.
This article first appeared on GuruFocus.
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