Stifel upgrades Microsoft to buy, sees 15% upside — SkimNews
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- Stifel upgraded Microsoft to buy from hold, raising its price target to $575 from $530 — more than 15% upside from Tuesday's close — leaving only two Wall Street firms with hold ratings and no sell recommendations among 57 buy-equivalent ratings.
- Microsoft's Azure revenue growth accelerated to 43% on a constant-currency basis in the June quarter, beating the FactSet consensus of 40.4% and up from 39% and 38% in the prior two quarters, with Stifel expecting 200-300 bps of ongoing upside.
- Microsoft shares surged 15.5% after the July 28 earnings release, climbed to a peak of $513.53 on Aug. 28, and as of Wednesday remain up over 3% year-to-date after recovering from a roughly 19% YTD decline entering earnings.
- Copilot paid seats topped 30 million in Microsoft's June quarter, a 10 million increase from the prior quarter, with Stifel projecting the AI tools will sustain healthy average-revenue-per-user gains for Microsoft 365.
- Microsoft receives a 20% revenue share from OpenAI and serves as its primary cloud provider, meaning Microsoft's results benefit directly from OpenAI's business uptick as noted by Stifel analysts.
- Microsoft on Wednesday announced plans to invest over $10 billion across the Middle East by 2030 to expand its data center presence, signaling no moderation in compute infrastructure spending.
- Other analysts joined the bullish chorus this week: Oppenheimer raised its target to $570 from $510, Cantor Fitzgerald to $608 from $522, and Rothschild & Co. Redburn to $440 from $400 (though it maintained a rare hold rating).
- Microsoft raised its dividend last week, which CNBC Investing Club portfolio director Jeff Marks cited as another encouraging sign for future cash flows alongside the company's free-cash-flow-positive status among hyperscalers.
Why it matters: With Stifel's upgrade, the consensus has nearly unanimously turned bullish on Microsoft — 57 buy ratings and zero sells — driven by Azure's 43% growth and Copilot's 30 million paid seats, up 10 million in one quarter. For investors, the rapid collapse of analyst skepticism since the July 28 print means Microsoft's $10 billion Middle East data center bet and continued AI capex are now being rewarded rather than punished, though the stock still trades about 8% below its all-time high.
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