Artificial intelligence may be ‘iPhone moment’ for Microsoft in price target hike, analysts says

Artificial intelligence may be ‘iPhone moment’ for Microsoft in price target hike, analysts says

THE RATINGS GAME

Wedbush analyst Dan Ives on Thursday raised Microsoft Corp.’s price target on a bullish view for its Copilot chat bot and other artificial intelligence products.

Ives compared Microsoft’s prospects in artificial intelligence (AI) to Apple Inc.’s iPhone, a blockbuster product since its 2007 launch.

“We view this as Microsoft’s ‘iPhone moment’ with AI set to change the cloud growth trajectory in Redmond over the next few years,” Ives said.

The stock has yet to price in the next wave of cloud and AI expansion due to Microsoft’s “strong competitive cloud edge” compared to Amazon.com Inc. and Alphabet Inc.’s Google unit, Ives said.

Ives lifted Microsoft’s 12-month target price by $25 to $450 a share and reiterated his outperform rating as well as the stock’s status as a “best ideas” pick.

He cited incrementally bullish checks with Microsoft’s AI customers and “game-changing” monetization of its Copilot product “now on the doorstep” for 2024.

Wedbush estimated Copilot could generate $25 billion in revenue for Microsoft by fiscal year 2025.

“In a nutshell based on our recent work in the field we believe over the next three years over 60% of its MSFT installed base will ultimately be on this AI functionality for the enterprise/ commercial which changes the landscape,” Ives said.

Along with the iPhone, Ives compared the prospects for AI to the mainstream adoption of the internet starting with the debut of the Netscape browser some 28 years ago.

“We continue to believe this is a ‘1995 Moment’ with a transformational tech spending wave not seen since the start of the Internet in the mid 90’s with AI now hitting the shores of the tech sector,” Ives said.

Microsoft’s stock was up .by 0.2% in premarket trading on Thursday. The stock, which is a component of the Dow Jones Industrial Average, is up by 56% in 2023, compared to a 13.6% rise by the DJIA.