Analyst Insights: Azure’s Growth Signals an Optimistic Outlook
Piper Sandler analyst Brent A. Bracelin expressed an Overweight rating on Microsoft Corp MSFT with a price target of $455.
Bracelin highlighted factors that could boost investor confidence in the flagship Microsoft Cloud segments in 2024.
Anticipating Azure’s growth to accelerate slightly to 29%-30% year-on-year, Bracelin outlined a clear revenue trajectory to reach $95 billion within two years.
Flagging ARPU expansion at O365, sustaining 15%-18% growth for a product with over $50 billion in revenue potential by fiscal 2025, Bracelin pointed to the product’s potential.
Peering into the future, Bracelin emphasized the possibility of Microsoft Cloud revenue surpassing $200 billion at a 22%+ CAGR over three years, compared to $51 billion+ in fiscal 2020.
The analyst expressed enthusiasm for the potential of Microsoft’s AI, recognizing an early advantage but acknowledging its small share of revenue. Despite this, he identified the cloud as the underlying growth engine propelling the business forward. Microsoft is set to announce its quarterly results on January 30.
The analyst projected second-quarter revenue and EPS of $61.16 billion and $2.75.
Additionally, Oppenheimer’s analyst Timothy Horan maintained an Outperform rating on Microsoft with a price target of $410, underlining the significance of this quarter for Microsoft and the tech sector. This provides an early indication of its progress as a full-stack, one-stop shop for AI and its advancements in monetizing Generative AI.
Anticipation Surrounding AI Innovations and Growth Prospects
Highlighting the impact of Copilot on achieving measurable customer gains and justifying premium pricing, Horan emphasized the importance of progress in customer adoption, ARPU growth, profitability, and new Copilot applications.
Emphasizing Microsoft’s conversion of its early lead in the new AI wave into a $3 trillion market cap, Horan identified the need for the company to continue delivering innovative new products such as CoPilot, Arc, Maia, Phi-2, OneLake, and Fabric, to make GAI’s promise a reality.
The analyst projected second-quarter revenue and EPS of $60.92 billion and $2.74.
Price Action: MSFT shares closed higher by 0.57% at $404.87 on Thursday.
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