Microsoft (MSFT) Stock Is 30% Below Its High — Here Is the Bull Case

TLDR

• MSFT trades around $421, with analysts setting an average price target of $560.88 and a “Moderate Buy” consensus from 39 buy ratings.
• A new analysis projects MSFT could hit $600 based on earnings growth, with revenue forecast to grow from $318.3B to $486.5B over three years at a 15% annual growth rate.
• Q3 earnings beat estimates: EPS of $4.27 vs. the $4.06 consensus, on revenue of $82.89B, up 18.3% year-over-year.
• Institutional investors own 71.13% of MSFT, with multiple firms increasing positions recently, including Bill Ackman’s Pershing Square taking a new multi-billion-dollar stake.
• Headwinds include a UK antitrust probe into Microsoft’s cloud and business software, LinkedIn cutting 5% of its workforce, and heavy AI infrastructure spending that could pressure margins.

Microsoft (MSFT) stock is trading around $421, sitting well below its 52-week high of $555.45, but new analysis and fresh institutional buying suggest the market may be undervaluing it.

Microsoft Corporation, MSFT

A model from Trefis puts a $600 price target on MSFT, based purely on earnings growth rather than any expansion in valuation multiples. The current P/E sits at around 24.3 — well below the three-year average of 33 and the 2017 peak of 48.

The math is straightforward. Revenue grew 17.9% over the past twelve months, above the three-year CAGR of 15.3%. The model assumes that pace fades slightly to a 15% annual growth rate over the next three years, lifting revenue from $318.3 billion to roughly $486.5 billion.

Apply a slightly trimmed net margin of 38.3% — down from the current 39.3% to account for AI infrastructure costs — and the earnings base reaches $186.1 billion. That is a 49% jump from today’s $125.2 billion.

Keep the P/E flat at 24.3 and that earnings base implies a market cap just above $4.5 trillion, translating to roughly $610 per share.

Earnings Back the Story

The latest quarterly results added weight to the bull case. Microsoft posted EPS of $4.27 for Q3, beating the $4.06 consensus by $0.21. Revenue came in at $82.89 billion, topping estimates of $81.44 billion and up 18.3% year-over-year.

Return on equity stands at 31.94%, with a net margin of 39.34%. Analysts now forecast full-year EPS of $16.76.

The dividend is also ticking up. A quarterly payment of $0.91 per share is due June 11, representing an annualized yield of around 0.9%.

Institutions Are Buying

Institutional ownership sits at 71.13%, and multiple firms added to positions recently. Bill Ackman’s Pershing Square disclosed a new multi-billion-dollar stake, calling the valuation “compelling” and pointing to Azure, Microsoft 365, and AI as growth drivers.

Wealth Management Nebraska raised its stake by 35.8% in Q4, adding 1,416 shares. WFA Asset Management, Discipline Wealth Solutions, and others also increased their positions.

Price targets from analysts range from $400 (Rothschild & Co Redburn, neutral) to $575 (Wedbush, outperform). Benchmark recently raised its target from $450 to $525.

The 50-day moving average is $398.18, and the stock is trading above it — a modest technical positive after a difficult stretch from its 52-week high.

On the risk side, the UK opened an antitrust investigation into Microsoft’s business software and cloud practices. LinkedIn, a Microsoft unit, announced it is cutting 5% of its workforce. And EVP Kathleen Hogan sold 12,321 shares in March at $409.52.

Heavy capital expenditure on AI infrastructure remains the key margin risk flagged in the analysis. The thesis holds as long as quarterly revenue growth stays at or above 15.2%.

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