Two updates from analysts at influential companies helped bolster the buy case for Microsoft (MSFT +3.64%) stock on Monday. The storied tech sector incumbent saw its share price improve by 3.6% that trading session, easily outpacing the 1% gain of the benchmark S&P 500 index.
Bargain hunters
Arguably, the more impactful of the two reports was published last Friday, yet by the following trading day, it was still shaping investor behavior. This was a tech sector overview from Goldman Sachs that heightened the rout many legacy software companies have endured so far this year.
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Much of this is due to fears of disruption by artificial intelligence (AI), which, some worry, could become “smart” enough to code sophisticated applications with little or no involvement from human programmers.
Markets tend to overshoot, and Goldman Sachs — in the person of its chief global equity strategist, Peter Oppenheimer — believes this has left many otherwise over-performing companies undervalued. Oppenheimer was quoted as saying that the sell-off has “opened up an opportunity in the technology sector where growth rates remain strong, but valuations are now low.”
Today’s Change
(3.64%) $13.51
Current Price
$384.38
Key Data Points
Market Cap
$2.8T
Day’s Range
$371.08 – $384.47
52wk Range
$355.67 – $555.45
Volume
1.8M
Avg Vol
37M
Gross Margin
68.59%
Dividend Yield
0.94%
Not so scary
Compounding that, Bernstein SocGen Group’s Mark Moerdler published a new note on Microsoft stock Monday morning. He reiterated his outperform (i.e., buy) recommendation and $641 price target for the tech giant.
I’d agree with both of these new assessments. Regarding AI, I’d point out that rather than being left in the dust, sector incumbents like Microsoft are actually embracing the technology (for example, the company has poured billions of dollars into OpenAI, the developer of ChatGPT).
Meanwhile, I doubt any AI model, no matter how effective its coding skills, will supplant Microsoft’s foundational software and its cloud offerings, to name but two aspects of its business. I remain very bullish on the company’s future.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs and Microsoft. The Motley Fool has a disclosure policy.