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Microsoft shares target raised by $20 on durable business outlook

EditorAhmed Abdulazez Abdulkadir
Published 04/17/2024, 06:22 PM
© Reuters.

On Wednesday, Wells Fargo maintained its Overweight rating on Microsoft Corporation (NASDAQ:MSFT) and increased the stock's price target to $480 from the previous $460. The adjustment reflects the firm's confidence in the tech giant's sustainable growth and long-term favorable conditions.

The new price target is based on a price-to-earnings (P/E) multiple of 34.5 times the forward next twelve months (NTM) estimates. Wells Fargo justifies this premium valuation due to Microsoft's "unprecedented scale and durability" and the positive long-term tailwinds it anticipates for the company.

Wells Fargo's analyst pointed out that Microsoft's stock is currently trading at a P/E multiple of 34.5 times their NTM estimates. This valuation is seen as merited by the firm, given Microsoft's robust business model and the expected benefits from ongoing trends.

Despite the current capital expenditure cycle focused on artificial intelligence impacting free cash flow (FCF) multiples, Wells Fargo emphasizes the importance of P/E multiples as a more reliable metric in the interim. The firm's stance indicates a focus on the company's earnings potential rather than immediate cash returns.

The price target hike comes amid a period where tech companies are heavily investing in AI, with Microsoft's own investment decisions playing a significant role in its financial outlook. Wells Fargo's updated target suggests a continued bullish outlook for Microsoft's shares in the market.

InvestingPro Insights

Wells Fargo's optimistic stance on Microsoft Corporation (NASDAQ:MSFT) is further supported by the company's impressive financial metrics and market position. According to InvestingPro data, Microsoft boasts a substantial market capitalization of $3080.0B, reflecting its massive scale in the technology sector. The company's P/E ratio stands at 37.49, indicating a premium valuation that aligns with Wells Fargo's analysis. Additionally, Microsoft's revenue growth over the last twelve months as of Q2 2024 is reported at 11.51%, showcasing the company's ability to expand its top line effectively.

Two noteworthy InvestingPro Tips for Microsoft include its commendable history of raising its dividend for 18 consecutive years and the stock's tendency to trade with low price volatility. These factors contribute to Microsoft's attractiveness as a stable investment with a track record of returning value to shareholders. Investors should also note that InvestingPro lists a total of 17 additional tips for Microsoft, providing a comprehensive view of the company's financial health and stock performance.

For readers interested in a deeper analysis and more tips on Microsoft, consider exploring InvestingPro. Don't forget to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with valuable insights.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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