Microsoft (NASDAQ:MSFT) stock, historically known for Windows and business software, continues to innovate into new niches. The company’s business model is one that’s well-suited to AI-related integrations, and the company has done just that via its large investment in OpenAI and its ChatGPT large language model.
Generative AI has the ability to re-shape much of Microsoft’s core business. The company’s Azure cloud segment could see additional upside, and there’s also the company’s gaming division set to take off after its Activision Blizzard acquisition. Overall, Microsoft is a tech giant that’s positioning itself to get even larger.
Let’s dive into why MSFT stock may remain a buy, despite trading around its all-time high.
New Record High
MSFT stock surged to a new peak following Thursday’s debut of its AI tool, Microsoft Copilot for Security. The tool, set for global release on April 1, aids security and IT experts safeguard operations against cyber threats by offering tailored insights and recommendations. Copilot for Security boasts a multilingual interface and utilizes a vast threat intelligence database to assist users in eight languages.
The stock is currently trading right at its current high of roughly $430 per share. Experts and analysts are optimistic about the stock’s growth. JPMorgan (NYSE:JPM) is excited about the Microsoft Copilot release, which will revolutionize the company’s security capabilities. Mizuho also expressed positive sentiments for MSFT as it sees potential in its pricing model. Both analysts maintain buy ratings with targets of $440 and $450 per share, respectively.
In early 2023, Microsoft integrated Copilot assistants into its software suite through collaboration with OpenAI. On February 29, it recently introduced Microsoft Copilot for Finance, catering to corporate finance needs. Microsoft will host its “New Era of Work” event on March 21, focusing on workplace AI innovations, Windows updates, and Surface devices.
Robust Financials
Microsoft Corp has recently attracted attention from investors and analysts for its strong financial performance. With shares priced at $425.99 and a daily gain of 2.62%, its three-month change stands at 16.34%. That’s an impressive move for a company sitting at a $3.16 trillion market cap with about $227.58 billion sales.
Microsoft prides itself with an excellent operating margin 44.17%. Popular due to its Windows OS and Office Suite, Microsoft offers productivity, computing segments, and cloud intelligence in one.
Microsoft continues to demonstrate financial resilience with a strong balance sheet. The company’s impressive Interest Coverage ratio of 41.68 should allow Microsoft to continue to invest in its core business, and continue to pay out growing dividends (though that’s not why most investors hold this stock).
GPT-5 Turbo Might Be Happening
Speculation has arisen in the AI community after Microsoft Corp hinted at GPT-5 Turbo’s potential inclusion in its Copilot Pro subscription. However, Mikhail Parakhin from the company dismissed this as a typographical error. Although rumors of GPT-5’s release have circulated, neither Microsoft nor OpenAI have officially confirmed it.
In Microsoft’s Copilot Pro subscription, clues about GPT-5 Turbo were found, but Parakhin clarified it was meant to be GPT-V, representing ‘Vision’, not the numeral. Despite the correction, the typo persists on Microsoft’s site, fueling speculation. Amidst advancements like Anthropic’s Claude 3 generative AI model, the potential introduction of GPT-5 Turbo is significant in the evolving AI landscape.
Earlier, OpenAI accidentally leaked details about GPT 4.5 Turbo, hinting at advancements in chatbot capabilities.
Don’t Ignore MSFT Stock
Experts anticipate the company’s revenue to rise 15% in two years’ time. The company’s earnings per share are also expected to rise 17% annually for the foreseeable future. Although the company’s forward price-earnings ratio may seem high, Microsoft’s confident growth and AI innovations continues to drive a positive narrative around the company’s long-term prospects.
In my view, Microsoft is the mega-cap stock investors should be focusing in on right now. On any dips, I’m going to think about buying this stock myself.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
