Microsoft Sees 32% Upside to Reach $650 Target

Microsoft just wrapped up its biggest fiscal year on record, with annual revenue of $331 billion and Azure surpassing $100 billion in growth. Despite this impressive performance, shares sit at $491.71, essentially flat for the year.

The disconnect between Microsoft's fundamentals and stock price is attributed to high capital expenditures, which ran $115.9 billion last fiscal year. Management guided FY27 capex to around $175 billion, causing investors to reevaluate the AI trade. As a result, shares are down 1.68% over one year.

However, Wall Street sees significant upside potential for Microsoft's stock price. The consensus analyst target price sits at $569.45, with 14 Strong Buy and 40 Buy ratings. Our own base case predicts a price of $592.13, with a bull case of $616.72. To reach $650 per share, shares would need to gain roughly 32.2%.

Microsoft's growth story is compelling, with commercial RPO growing 84% and first-quarter Azure growth guided to around 45%. CFO Amy Hood stated 'Demand continues to exceed available supply', while Satya Nadella expressed confidence in the company's opportunity for durable long-term growth.