Key insights
- Evercore ISI reiterated an Outperform rating on MSFT with a $580 price target, citing strong Azure growth and significant capacity expansion in the second half of the year. They believe demand remains strong given the level of investment. A soft guide on capital expenditure growth could attract value investors. However, TD Cowen lowered its price target to $540, citing constraints.
Investing.com - Evercore ISI reiterated an Outperform rating and $580.00 price target on Microsoft (NASDAQ:MSFT) ahead of the company’s fiscal third-quarter results, scheduled for April 29. The target suggests significant upside for the $3.14 trillion software giant, which InvestingPro data indicates is currently undervalued based on its Fair Value analysis.
The firm said fiscal third-quarter results are focused on building momentum into the fourth quarter and the second half of the calendar year when new capacity is expected to come online for Azure. Evercore ISI said Azure growth at the high end of guidance against a 4% tougher sequential comparison should be sufficient.
The firm noted reports that Microsoft has taken on Stargate capacity in Texas and Norway in the past month. The company announced new capacity coming online in Denmark, with investments in the Global South and a new region in Saudi Arabia coming in the fourth calendar quarter.
Evercore ISI said it is difficult to imagine that demand is anything but strong with this level of investment. The firm said the timing of these announcements aligns with the capital expenditure acceleration and the potential for increased capacity in the second half of the calendar year.
The firm said a soft guide that suggests capital expenditure growth is peaking would be helpful in getting value investors back on board, given the current pace of growth of 67% in fiscal year 2026. InvestingPro subscribers have access to over 10 additional exclusive tips for MSFT, plus comprehensive Pro Research Reports covering 1,400+ US stocks with expert analysis and actionable intelligence.
In other recent news, Microsoft is reportedly in the final stages of securing a long-term memory supply agreement with SK Hynix, which could ensure access to memory for the next five years. This development comes amidst analyst updates on Microsoft’s stock. TD Cowen has lowered its price target for Microsoft to $540 from $610, citing constraints in GPU capacity that may limit Azure’s growth in the upcoming third-quarter results. Baird also adjusted its price target to $500 from $540, expressing concerns over Microsoft’s software exposure and competition related to Copilot. Meanwhile, KeyBanc maintained an Overweight rating on the stock with a $600 price target, highlighting Microsoft’s strong performance in meeting or exceeding expectations 90% of the time. These recent developments reflect a mix of strategic maneuvers and cautious optimism from analysts regarding Microsoft’s future prospects.
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