Microsoft Stock Gets 2 New Price Targets. What’s Behind the Moves.

With all of the excitement around the future of AI and what it could do for tech companies, Microsoft shares have surged about 38% so far this year. Multiple analysts, among them Wedbush’s Dan Ives, think the stock could climb even higher—and are bullish on how AI can boost the company’s revenue.

Microsoft is winning the AI arms race, but monetization will be the next phase, Ives said in a Sunday research note. “Over the last few weeks in our numerous conversations with Microsoft customers, partners, and field checks it has become crystal clear to us that the monetization opportunities around deploying AI and ChatGPT in the cloud is a transformational opportunity across the industry,” he wrote. Ives raised his price target from $340 to $375, while keeping his Outperform rating on the stock.

Microsoft is already pushing ahead: Earlier this month, the company announced it is implementing advertisements through chat API, allowing websites and apps to customize their chats and incorporate advertisments.

Credit Suisse analyst Sami Badri, another Microsoft bull, also recently raised his price target on Microsoft stock from $350 to $420 while maintaining an Outperform rating. He believes the company could cash in on AI another way: Raising prices on the Microsoft Office suite of software. It’s currently sold with an AI tie-in program dubbed “Copilot” that helps users write documents faster and create PowerPoint presentations, among other tasks.

“We believe this step function increase in productivity of the Office suite gives MSFT a clear opportunity to drive a substantial price increase across the entire Office installed based commensurate with the increased productivity that customers gain, along with the ability for MSFT to add ultra-premium AI/GPT- integrated bundles,” Badri wrote in a Wednesday note.

Microsoft shares were down 0.5% on Wednesday, trading at $329.62 each.

Write to Angela Palumbo at [email protected]