Morgan Stanley Sticks to Bullish Outlook for Microsoft Amid Accelerating Azure Growth
Morgan Stanley maintained an Overweight rating for Microsoft with a $600 price target in its latest report, citing the company's attractive total return structure driven by accelerating Azure growth and Copilot monetization.
The bank believes Microsoft's earnings growth and AI leadership have not yet been fully priced in, with the current dividend yield of approximately 1.1% being moderate among large-cap tech stocks.
In a base case scenario, Morgan Stanley assumes FY28 EPS of $24.06, applying a 25x P/E multiple for a $600 price target, while in a bull scenario, stronger contributions from Azure and AI yield FY28 EPS of $27.64, corresponding to a $795 price target.
The report highlights that Microsoft's dividend increase is slightly below the average annual growth rate of approximately 10% over the past five years, but reflects management's confidence in cash flows and earnings outlook, while retaining capital for AI infrastructure investments.