Microsoft Corp. shares broke their streak of six consecutive winning sessions on Wednesday, despite receiving enthusiastic support from bullish analysts.
Analysts are particularly encouraged by Microsoft’s recent disclosure of pricing levels for their artificial intelligence (AI) offerings, which exceeded expectations. This is seen as a positive sign for the company’s potential revenue.
Surprisingly Positive Pricing for AI Tools
UBS analyst Karl Keirstead praised Microsoft’s announcement, stating that the $30 per-user per-month price point for the M365 Copilot product greatly exceeded expectations. This price aligned with many of the core Office 365 offerings, surpassing the earlier estimate of $10-$15 per seat. Keirstead’s confidence in the product is evident in his note to clients titled “The Copilot Might Earn as Much as the Pilot.” He rates the stock as a buy with a $400 target price.
Morgan Stanley analyst Keith Weiss echoed Keirstead’s sentiments, highlighting that this pricing demonstrates the compelling value of the technology. He believes that this supports the potential for even more significant contributions from Copilot to Microsoft’s business in the years ahead.
Weiss also anticipates that a separate version of Copilot with fewer enterprise features will be released at a lower price point, creating an additional revenue opportunity. He has an overweight rating on Microsoft shares, with a target price set at $415.
Mizuho analyst Gregg Moskowitz further validated the positive pricing structure, increasing his price target on the stock to $420 from $390. He believes that by the end of fiscal 2023, cumulative incremental revenue from Microsoft 365 Copilot could exceed $9 billion.
Despite this promising news, Microsoft shares experienced a slight decline of 1.2% at the end of Wednesday’s trading session. This drop followed an impressive 8.3% increase during the preceding six trading days.
A Promising Future for Microsoft’s AI Offerings
Microsoft’s disclosure of higher-than-expected pricing for their AI tools has garnered support from analysts, fueling optimism for the company’s revenue potential. With analysts predicting substantial revenue from the Copilot product, Microsoft is poised for continued success in the AI market.
Make sure to keep an eye on Oracle as well, as some analysts are drawing parallels between their cloud momentum and the rise of Microsoft.