Microsoft (MSFT) PT Raised to $650 at Scotiabank

Scotiabank analyst Patrick Colville raised the price target on Microsoft (NASDAQ: MSFT) to $650.00 (from $625.00) while maintaining a Sector Outperform rating.

The analyst commented: "We reiterate our Sector Outperform rating after MSFT delivered against high expectations, with F1Q Azure growth in line with the bogey and the F2Q guide beating the buyside hurdle (based on our extensive conversations this week). More impressive is that MSFT achieved this on lighter than expected Q1 capex as 3P capacity slipped to 2H27. Management touted ongoing engineering efficiencies across its GPU/CPU fleets, boosting our confidence that MSFT can handily outperform its F2Q Azure guide. Based on our short-lived capex analysis, we estimate Azure can grow in an upside case 54% in 2Q. With capex set to accelerate in F2H27, we wonder if F28 FCF could turn negative as management hinted at tapping the debt markets for funding. We added MSFT to our Top Pick List, and we see this print as evidence that the company is a leading horseman of the AI revolution. Durable AI monetization across Copilot and Azure, plus tailwinds from OpenAI frontier models, is driving high ROI on Microsoft capital spending. We acknowledge that Microsoft is currently a consensus buyside long, but we believe the path of least resistance for shares is higher especially with a valuation of just ~25x C27E P/E."

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