Microsoft (NASDAQ:MSFT) stock easily broke through $300 earlier this year. Does this mean it’s too expensive to hold now?
Not necessarily, as businesses are likely willing to pay a high price for Microsoft’s artificial intelligence enabled products. Plus, the company is moving closer to buying out a well-known video-game manufacturer.
Of course, there’s no guarantee that Microsoft will gain approval for that acquisition anytime soon. With that in mind, Microsoft stock gets a solid “B” rating and investors might consider holding their shares if they’re not ready to add to their positions now.
AI Puts MSFT Stock on the Path to $400
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.
Microsoft Clears a Major Hurdle
Even while Microsoft generates revenue from generative AI enabled products, the company also seeks to earn income from video game sales. Microsoft is on a long, challenging quest to acquire Call of Duty developer Activision Blizzard (NASDAQ:ATVI).
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.
Microsoft Stock: Choose Your Strategy
Some of Microsoft’s shareholders might be worried about pushback from British antitrust regulators. They can hedge their bets by holding Microsoft stock but not adding to their share positions.
Just remember, though, that people were concerned about resistance to the Microsoft-Activision deal from U.S. authorities. Now, in 2023’s second half, that resistance has greatly diminished.
Besides, Microsoft will undoubtedly continue to make waves with its leading-edge, AI-friendly product lines. Therefore, MSFT stock is likely on a path to $400 or more, and it earns a confident “B” rating.
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.
