Why $400 Could Be Just a Stepping Stone

Previously, we argued MSFT stock is likely to reach $400 within the next 12 months. Now, the bull case is only getting stronger even though Microsoft’s trailing 12-month price-to-earnings (P/E) ratio is higher than the sector median P/E ratio.
Just because Microsoft stock has rallied in 2023, this doesn’t mean it can’t provide value. After all, by embedding generative AI functionality in its most popular products, Microsoft opened the door to powerful revenue streams.
Thus, it makes sense that Piper Sandler analyst Brent Bracelin called Microsoft stock an “AI All-Star” and assigned a $400 price target on the shares.
The company announced that Microsoft 365 Copilot “will be priced at $30 per user, per month.”
Microsoft 365 Copilot helps businesses manage Excel, PowerPoint, Outlook and Teams, and is generative AI-enabled. Oppenheimer analysts had only expected Microsoft to charge businesses $20 per user per month for Microsoft 365 Copilot. So, clearly Microsoft is confident in its ability to commercialize this AI-enhanced product line.

As you may recall, a federal U.S. appeals court rejected the Federal Trade Commission’s move to block the Microsoft-Activision deal. More recently, the FTC appears to have abandoned its efforts to prevent the acquisition through its in-house court.

This represents a giant leap forward for Microsoft, but it’s not an all-clear for the deal to go through. Microsoft still has to deal with resistance from the Competition and Markets Authority, which is Great Britain’s antitrust regulator.
According to a Reuters report, the CMA “said it is likely to be able to reach a new provisional view on” a restructured Microsoft-Activision deal “in the week beginning Aug. 7.” So, keep an eye out for further developments on this.