Microsoft (NASDAQ:MSFT) stock might be a “Magnificent Seven” play, but it still has challenges. It’s fine if you’re bullish on artificial intelligence technology. Just don’t feel the need to be a perma-bull as regulatory obstacles could cause ongoing problems for Microsoft.
MSFT has risen substantially in 2023, especially after the company invested in the technology powering OpenAI’s generative AI chatbot, ChatGPT. Now, prudent investors should weigh the risks and potential rewards of Microsoft. So, let’s start off with one analyst’s assessment, which might surprise you.
An Ambitious Price Target for MSFT Stock
Here’s the scoop. Oppenheimer analyst Timothy Horan recently published an “outperform” rating and $410 price target on MSFT stock. This would imply substantial gains for Microsoft shares even after a considerable rally in 2023.
You might assume that Horan is so bullish because of Microsoft’s likely imminent acquisition of Call of Duty video game seller Activision Blizzard (NASDAQ:ATVI).
That’s certainly a growth catalyst to consider. However, Horan’s primary focus seems to be Microsoft’s investment in OpenAI. According to his calculations/estimations, Microsoft’s 49% stake in OpenAI could be worth nearly $100 billion.
However, it’s difficult to predict the future growth trajectory of the generative AI technology market.
Horan’s estimate of the value of Microsoft’s stake could be off-base. Cautious investors should take the analyst’s calculations, along with his price target for MSFT stock, with a grain of salt.
Microsoft Faces Regulatory Scrutiny in Europe
You may recall that Microsoft locked horns with the U.S. government over anti-monopoly concerns many years ago. The parties resolved the dispute eventually, but now Microsoft is embroiled in another regulatory battle.
This time, however, Microsoft is in the crosshairs of the U.K.’s Competition and Markets Authority. This is the same regulatory entity that had challenged Microsoft’s intent to acquire Activision Blizzard.
Reportedly, the CMA is investigating Microsoft’s share of the U.K.’s cloud-computing market. The CMA valued Britain’s cloud market at roughly $9.1 billion in 2022.
Thus, the stakes are high here as the CMA probes Microsoft for potential anti-competitive practices. As Barron’s points out, “any changes that the regulators demand could set a precedent for other markets.” So, an unfavorable outcome of this investigation could cause ongoing problems for Microsoft.
MSFT Stock: It’s Your Call
Microsoft will likely grow and thrive in the coming years as it’s a tech-market giant. Yet, regulators in the U.K. might feel that Microsoft is too giant and needs to be kept in check.
Thus, Microsoft has to face challenges just like any other company. It’s your call as to whether Horan’s $410 price target is realistic, but some skepticism is understandable.
Just remember that Microsoft’s future growth is difficult to estimate or calculate accurately. Hence, MSFT stock gets a “B” grade and may be appropriate for your portfolio in moderation.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
