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Microsoft’s generative artificial intelligence prospects are impressive. But the stock has more to offer investors than just the new tech. Jim Cramer said Microsoft shares could bottom Wednesday — and out of all the megacap tech stocks, this Club name is the one to buy. Microsoft closed at a record high of $467 on July 5. But then, almost immediately, it began to slide. It got no help from its July 30 earnings report and made a recent bottom in the Aug. 5 market plunge. The stock’s subsequent recovery stalled out late last month and turned lower once again. Exacerbated by Tuesday’s tech wreck, shares on Wednesday were back to where they were around on Aug. 2 at $408 each. MSFT YTD mountain Microsoft YTD Wells Fargo is more aligned with Jim, pointing out three “underappreciated levers” — search, cybersecurity, and enterprise software — that could add to Microsoft’s overall revenue growth. The analysts added the stock to their “Signature Picks” list — keeping a buy-equivalent overweight rating and a price target of $515. The Club has a price target of $500 on the stock. Microsoft’s search engine Bing could grab more share in the search market from Alphabet , Wells Fargo said in a research note Wednesday, citing last month’s antitrust case loss regarding exclusivity deals with device makers like Apple. If Google Search is no longer the iPhone’s default search engine, then more business could come to Microsoft. To be sure, search is small at Microsoft compared to Alphabet. Google Search has about 88% market share in the U.S., versus just over 7% for Bing, according to web data provider StatCounter. The numbers worldwide are even more lopsided in Google’s favor. Wells Fargo also highlighted Microsoft’s cybersecurity business. “Microsoft has quietly become the largest cybersecurity vendor on the planet, continuing to take share in adjacent areas,” the analysts wrote. Similar to others in the sector, Microsoft’s cybersecurity business can continue to rake in major corporations as clients as the threat of hacks and breaches remains elevated. Microsoft did take some heat when July’s CrowdStrike upgrade caused a major global IT outage . In 2023, Microsoft CEO Satya Nadella said the company’s cybersecurity business had surpassed $20 billion in revenue over a 12-month period. Microsoft’s customer relationship software suite, dubbed Dynamics, could see more upside as well, Wells Fargo said. The analysts see “significant cross-sell potential.” That’s because the company already has a massive customer base from its cloud computing business Azure and productivity apps included in Office. Bottom line These three underappreciated areas are encouraging, even though Microsoft’s generative AI efforts are still crucial to the Club’s investment thesis. While Azure revenue missed expectations last quarter, we still expect a pick-up in the back half of the year, given management’s bullish commentary around its outlook. Wall Street firms seem to agree with us. In addition to Wells Fargo’s bullishness, Piper Sandler added Microsoft to its high-conviction buy list on Wednesday due to these AI tailwinds. (Jim Cramer’s Charitable Trust is long MSFT, GOOGL, AAPL, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Executive Chairman and CEO of Microsoft Corporation Satya Nadella speaks during the “Microsoft Build: AI Day” event in Bangkok, Thailand, May 1, 2024.
Chalinee Thirasupa | Reuters
Microsoft’s generative artificial intelligence prospects are impressive. But the stock has more to offer investors than just the new tech.
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