Microsoft stock ain't cheap but AI story 'has barely played-out': UBS
) upcoming 4Q earnings report, UBS analysts highlighted three main discussion points in a note Friday: Azure's potential upside from AI and core demand, capital expenditure trends, and the growth trajectory of Office 365.
"The read-through from the Google Cloud results was positive, as was our meeting with rival/partner CoreWeave last week. CoreWeave's revenue and backlog growth trajectory is outstanding and with Microsoft as a major customer, we view this as a positive for AI infra demand," UBS wrote."Bottom line, the investor bogeys for 4Q/Jun actual c/c Azure growth of 32% and guide for 30% in 1Q/Sept seem doable," UBS stated.
Despite recent stock fluctuations, UBS views Microsoft's valuation as justified."The stock isn't cheap at 38x CY25 FCF but, in our view, is justified by 15%+ EPS growth in FY25 and a compelling AI story that has barely played out," UBS added. In conclusion, UBS remains bullish on Microsoft, driven by its promising AI prospects and strong fundamentals despite the high valuation and tight IT budget backdrop.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.
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