Microsoft rises as UBS upgrades, citing stabilizing cloud spending, AI catalysts
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Microsoft (NASDAQ:MSFT) shares rose 1.5% in pre-market trading on Friday after investment firm UBS upgraded the tech giant, citing a better cloud environment and benefits from artificial intelligence. 
Analyst Karl Keirstead raised his rating on Microsoft (MSFT) shares to buy from neutral and boosted his per-share price target to $400 from $345, noting that there has been evidence that spending for both Azure and Amazon's (AMZN) AWS have started to stabilize after a "significant" deceleration over the past year.
"Our latest round of checks suggest the backdrop remains tough but is no longer deteriorating - the worst may be behind us," Keirstead said of the cloud environment, citing that some partners said new bookings were "slowly recovering."
"Net, we raise our Azure estimates for 4Q/Jun and beyond." 
Keirstead pointed out that while Microsoft (MSFT) has benefited from a lot of enthusiasm surrounding AI - with the stock up more than 40% year-to-date - it could reap further gains with Azure's revenue growth rate rising from more AI workloads and the pending Microsoft 365 Copilot monetization announcement, which could be as much as $10 to $15 per seat.
"The current CY24E FCF multiple of 38x is at a premium to the broader peer group at ~30x, but in our view Microsoft shares deserve a higher premium given the company's direct and material exposure to the emerging AI opportunity and the fact that CY24 might be an unusually elevated period of capex intensity, depressing [free cash flow]," Keirstead added.
Analysts are largely cautious on Microsoft (MSFT). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates MSFT a HOLD.
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