Why Microsoft Stock Beat the Market on Monday

What happened

On Monday, two fresh analyst takes on Microsoft (MSFT 3.12%) made the stock a winner. The storied tech-company’s share price climbed 3.1% higher, nearly three times the percentage gain of the S&P 500 index on the day. 

So what

The first take was published by Stifel‘s Brad Reback. Shortly before the market opened, he lifted his Microsoft price target to $290 per share from $275. Reback maintained his buy recommendation on the tech-giant’s shares.

The reasoning behind the new take wasn’t immediately apparent. However, Reback wasn’t the only analyst expressing a bullish opinion about Microsoft on the first day of the week.

On Monday, Morgan Stanley prognosticator Keith Weiss reiterated his overweight (read: buy) recommendation on the stock at a more ambitious $307 per-share price target. Even though the company has seen a boost in popularity among investors lately because of its involvement with ChatGPT developer OpenAI, its fundamentals are quite solid and position it for growth.

“Easing compares [comparables], price increases, waning FX headwinds and decelerating [operating expenses] all work to accelerate EPS [earnings-per-share] growth to double digits by Q4, with accelerating EPS growth in each of the next five quarters,” Weiss predicted.

Now what

The analyst was particularly encouraged by Microsoft’s performance in the cloud segment. According to his forecast, margins for the segment are likely to peak at around 72% this year, helping the company to approach 70% across all its businesses. That’s a very high level for a company in any sector, even in the often very profitable tech industry.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.