Melius Upgrades Microsoft to Buy on AI Security Demand

Microsoft Corporation (NASDAQ:MSFT) is gaining attention after Melius upgraded its stock rating from Hold to Buy and set a price target of $665. The upgrade comes on the back of increasing enterprise demand for AI security and governance solutions, according to analyst Ben Reitzes. Microsoft's stock has surged around 40% from its June low of $353 and is now trading near its 52-week high of $553.72.

Melius has raised its fiscal 2027 earnings estimates by 2% and fiscal 2028 by 4%, while initiating a fiscal 2029 estimate of $30.77 per share, which is about 7% above the consensus. The $665 price target represents roughly 22 times that fiscal 2029 estimate. The firm anticipates Azure's growth to exceed 50% by the fourth quarter of fiscal 2027, driven by enterprises opting for secure systems to manage AI models and agents rather than relying directly on AI labs.

The upgrade follows recent statements from AI company executives highlighting concerns about AI risks, which has spurred immediate interest from enterprise resellers in Microsoft’s security offerings. Additionally, Microsoft recently announced the departure of Ryan Roslansky, the executive vice president overseeing M365 apps and a former LinkedIn CEO, while Piper Sandler raised its price target on the stock, citing growth in Copilot and Cowork, and maintained an Overweight rating.

Microsoft is set to report its first-quarter fiscal 2027 results later this month, with its Ignite conference planned for mid-November. At the time of publication, Microsoft shares are trading 0.46% higher at $519.89.