Proactive Investors - Microsoft Corporation (NASDAQ:MSFT) has seen its price objective raised by Bank of America (NYSE:BAC) (BoA) analysts from $430 to $450 on their thesis that its Azure and Office offerings will drive upside in the fiscal second quarter.
Shares of Microsoft traded 0.7% higher at US$392.18 late morning on Thursday.
The BoA analysts wrote in a note to clients that they expect a 1% constant currency revenue upside to their fiscal second quarter estimate of $60.9 billion from continued strength in Microsoft’s cloud services Azure and Microsoft 365, offset by weaker PC shipments.
“For Azure, growing contribution from AI workloads and an improving macro are likely to drive accelerating new workload and revenue growth from the current 26.5% constant currency growth forecast,” they wrote.
“In summary, we expect total revenue growth to accelerate to solid high teens from current mid-teens level in a reasonable upside case.”
Based on this expectation, the analysts reiterated their ‘Buy’ and ‘top pick rating’ on Microsoft on their view it represents a solid reacceleration story in 2024.
“Accelerating average selling price growth from M365 Copilot attach is likely to drive Office growth toward 20%,” they added.
They noted that channel feedback suggested only early interest in M365 Copilot, an AI-driven tool integrated into the M365 suite of productivity software.
However, they wrote that modest penetration upside translated to meaningful incremental average selling price growth with each 1% penetration equal to growth of 2.5% in incremental average selling price.