Meetings with a company’s top brass can provide invaluable insights into its inner workings and shine a light on the opportunities available.
After spending almost a full day with some of Microsoft’s (NASDAQ:MSFT) senior management team at its Redmond base, Bernstein’s Mark Moerdler, a 5-star analyst rated in the top 2% of the Street’s stock pros, walked away seriously impressed.
“The company has a high sense of energy and excitement, and you can sense the speed it is moving at and the desire to move even more quickly,” Moerdler noted. “The innovation level is high, and Microsoft is extremely well-positioned to capture so much of the upside from that innovation, which is why Microsoft continues to be our favorite long-term investment. After having held these meetings, we are even more excited about the long-term prospects for the business and Microsoft’s ability to drive strong revenue growth, margin improvement and return of cash.”
So, what specifically got Moerdler so excited? Obviously, the AI opportunity was a focal point. Microsoft acknowledges that they are at the forefront of the Generative AI trend, setting the standard in contrast to previous cycles, such as the Cloud, where they were playing catch-up. This represents a significant shift for the company, and they are determined to maintain their edge.
“In fact,” adds Moerdler, “even compared to the Cloud transition where the sense of drive was high, this time it is even higher and there is more excitement within the organization.”
AI permeates every aspect of Microsoft’s operations, spanning both the SaaS and IaaS/PaaS segments. This interconnectedness fosters a “feedback loop” that few, if any, other companies can utilize to fuel ongoing innovation and widespread adoption.
The good news is that AI development is still in its infancy, and although management has a “line of sight to revenue,” the broader long-term opportunities are still taking shape. As such, Moerdler anticipates that the tech giant will refrain from setting specific long-term goals or targets. That’s no cause for concern, however, as Microsoft is “executing really well and is simultaneously focused on driving growth while driving margins.”
While Moerdler was already a big fan ahead of the meetings, the analyst came away even more enthusiastic about the long-term outlook. As investors “recognize near term the value being created,” there’s potential for the stock to become interesting sooner than Moerdler previously anticipated.
Bottom-line, Moerdler maintained an Outperform (i.e., Buy) rating on MSFT shares to go along with a $465 price target. Should the figure be met, investors will be sitting on returns of 13% a year from now. (To watch Moerdler’s track record, click here)
Almost no one is arguing with that take on Wall Street. MSFT’s Strong Buy consensus rating is based on 33 Buys and just 1 Hold and Sell each. At $469.58, the average target implies shares will gain 14% over the one-year timeframe. (See Microsoft stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
