Microsoft shares are gaining momentum: analysts predict $550 News ad

Microsoft today

$424.32 -3.67 (-0.86%)

(As of 10:15 a.m. ET)

52 week range

$362.90

▼

$468.35

Dividend yield

0.78%

P/E ratio

35.01

Target price

$503.03

Shares Microsoft Corporation NASDAQ: MSFT have been a cornerstone of technology portfolios for years, and 2024 has done little to tarnish that reputation. The stock is up 15% year to date, and while it is struggling to break past July’s all-time high, there are a few reasons for investors to be excited.

Chief among them is the fact that analysts are extremely optimistic about the tech titan’s prospects in 2025. With the stock trading in a narrowing range, we could expect a breakout soon. The company’s stock is currently less than 10% off its July high, so let’s jump in and see what could push it above that high in the coming weeks.

Microsoft’s fundamentals continue to impress

Let’s start with the company’s impressive fundamentals. Microsoft has consistently beaten analysts’ earnings expectations for more than two years, and that trend continued in its latest report, released late last month. In this report, the company beat expectations on both key metrics, with revenue growth of 16% year over year.

Investors should expect continued growth for the rest of the year, as the holiday quarter historically tends to be Microsoft’s strongest.

Bullish analysts’ updates keep Microsoft in focus

Based on the fact that internal affairs are going well, always a good starting point when considering a stock is the fact that some analysts are calling Microsoft a hot buy. In the last month alone, the teams at Royal Bank of Canada, UBS Group and JPMorgan, to name a few, have all reaffirmed their Buy ratings or equivalents. These updates reflect broader sentiment among analysts, who have been consistently bullish on Microsoft throughout 2024.

Just last weekWedbush’s team once again increased its bullish outlook on Microsoft shares, reiterating a Buy rating and a high $550 price target. Based on the stock’s close Tuesday night, that indicates a target upside of nearly 30%. Needless to say, Microsoft stock to reach that level in the coming weeks they would need to be well above the July high and heading into blue sky territory.

Potential Concerns: Analysts Overestimate Microsoft Price Targets

While there is a lot of optimism about the stock, there are some caveats to consider. While maintaining their bullish ratings, some analysts are holding back their price targets. For example, TD Cowen recently lowered its forecasts, citing higher capital expenditure forecasts. However, the fact that they refrained from downgrading the stock entirely from Buy speaks volumes about their confidence in the company’s long-term prospects. Additionally, even their revised $475 price target would see the stock trading at a new high.

As an additional counterbalance, it’s worth noting that Morgan Stanley did the opposite with its price target for Microsoft stock and actually raised it after last month’s report.

Microsoft’s technical setup suggests December growth is likely

From a technical point of view, there is also a lot to like here. After months of sustained consolidation and mostly sideways price action, the stock is now making higher lows, a key indicator of momentum gaining momentum.

Supporting this point is the fact that Microsoft’s MACD is on the verge of a bullish crossover, while its Relative Strength Index (RSI) is just 57. For context, the RSI is a popular technical indicator that measures the speed and magnitude of a stock’s recent movements. changes in price to assess whether it is overbought or oversold. It operates on a scale of 0 to 100, with values ​​above 70 indicating overbought conditions and values ​​below 30 indicating oversold conditions. At 57, Microsoft’s RSI suggests that momentum is firmly on the bullish side and the stock has plenty of room to rise before it can even be considered.

With the Fed cutting interest rates and broader indices such as the S&P 500 currently at record levels, the macro environment is also adding to the sense that a breakout to the north may be imminent. Investors should expect the stock to continue making higher lows in December, with a rise above $440 all but confirming that a breakout has begun.

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