Microsoft will get a boost from Azure and Copilot, Stifel says
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Robust growth from artificial intelligence and other initiatives will give Microsoft a boost, according to Stifel. The investment firm upgraded the tech giant to buy from hold. It also raised its price target on shares to $575 from $530, implying 15% upside from Tuesday's close. "We are increasingly comfortable with the company's ability to sustain mid/upper teens revenue growth as open-weight model advancement has boosted management's [large language model] agnostic strategy (Azure & Copilot)...operational efficiencies are supportive of stable operating margins and strong cash-flows should limit the company's need for outside financing," analyst Brad Reback said Tuesday in a note to clients. "For M365, product improvements should enable sustained strong Copilot adoption and, when combined with growing GitHub consumption, we believe this should support mid/upper teens growth." Shares of Microsoft have come under pressure as the company has seen capital expenditures balloon due to infrastructure demands for its cloud computing platform Azure and its investments into AI assistant Copilot. The stock has edged down 2% over the past year. MSFT 1Y mountain Shares are down about 2% over the past 12 months. However, Copilot and Azure are likely to fuel Microsoft's growth over the next year or so, lifting the company's shares, according to Reback. "Post our gross-margin concerns earlier this year, it is now increasingly evident that Azure operational efficiency efforts… disciplined capex spending and focused opex growth should enable Microsoft to sustain current operating-margins," Reback wrote. Stifel's call falls in line with consensus on Wall Street. Of the 60 analysts covering Microsoft, 57 have a buy or strong buy rating on the stock, LSEG data shows.