Despite recent underperformance compared to its technology peers, Citi Research analysts believe that Microsoft Corp. shares are set for a rebound. The Citi team has opened a positive 90-day catalyst watch on Microsoft's stock (MSFT), citing a promising outlook for the remainder of the year.
According to the analysts, Microsoft's shares have the potential for strong performance leading up to their fiscal first-quarter earnings, with factors such as a stabilizing PC market, improved Azure inputs, and a revenue acceleration trend. Although it is still early, the team expresses confidence in the stock's trajectory.
Citi also highlights several artificial-intelligence developments that could contribute to Microsoft's success, including the anticipated general availability release of its Copilot software. Customer feedback from Citi's August evaluations suggests positive reception for this offering.
In addition, the analysts view Microsoft Dynamics, an enterprise accounting and sales suite, as a potential third avenue for growth. They predict that consolidation and AI advancements will contribute to the accelerating growth of this suite.
While Microsoft shares have declined by 5% since their earnings report in late July, the iShares Expanded Tech-Software Sector ETF (IGV) has seen a 1% increase during the same period. However, Citi's basket of tech peers experienced a more substantial gain of about 5%.
Citi affirms its buy rating and sets a price target of $420 for Microsoft shares. Despite lagging behind most of their Big Tech counterparts in 2023, Microsoft's shares have already gained an impressive 41% year-to-date.
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