By Sam Boughedda
Oppenheimer analysts raised the firm's price target on Microsoft (NASDAQ:MSFT)(MSFT) to $310 from $280 per share on Thursday, based on long-term ChatGPT tailwinds.
The analysts, who have an Outperform rating on the stock, told investors in a note that they now assume AI tailwinds create a 10% incremental boost to annual growth in FY25 for Azure, rising to 25% in FY26 and 40% in FY27. In addition, they see a 20% incremental boost in FY25 for Office, rising to 30% in FY26 and 30% in FY27. "Based on these estimates, we increase our FY25, FY26, and FY27 revenue by 1%, 4%, and 9%, respectively," they said.
"Our FY23-FY24 consolidated estimates are fairly stable as it will take time for AI to ramp, but we did cut 3Q23E and 4Q23E Azure CC revenue growth to 30.1% and 25.8%, respectively, or 2-3pts below consensus, and FY24 to 24% vs. 27% consensus," wrote analysts. "Although USD revenue impact is tempered by 1pt better than expected FX, channel checks suggest grooming and slower migration to cloud remain headwinds."
While the analysts believe near-term offsets from the wobbly economy and the spreading banking sector rot will temper growth from ChatGPT and AI, they also state that "AI technologies are catalyzing the next platform shift, with Microsoft in the lead."