Wall Street is eagerly awaiting the financial reports of large technology companies to uncover signs that the artificial intelligence (AI) revolution is progressing smoothly. Bank of America believes that Microsoft's third quarter financial report released next week may demonstrate the power of the AI boom.
According to Bank of America, the tech giant's upcoming performance report on April 25th (Eastern Time) should be optimistic, with the bank raising its revenue forecast by 1%, mainly due to strong performance from Azure and Microsoft 365 departments.
The bank maintains its target price of $480 for Microsoft, which means the stock has nearly 19% upward potential compared to Thursday's closing price.
Bank of America strategists, including Brad Sills and Adam Bergere, wrote in their latest report that "thanks to the sustained strong performance of Azure and M365," they expect Microsoft to achieve a year-on-year growth of 11% in revenue for the quarter.
Bank of America also predicts that Microsoft's next growth peak may depend on significant advancements in artificial intelligence related products, such as the surge in M365 Copilot users or the enhancement of commercial Office ASP.
ASP, also known as Active Server Pages, is a server-side scripting environment developed by Microsoft that can be used to create dynamic interactive web pages and build powerful web applications. When the server receives a request for an ASP file, it processes the server-side script code contained in the HTML web page file used to build and send to the browser.
It is understood that ASP has the characteristics of dynamically generating web pages, accessing databases, using components, security, and scalability, and is widely used in applications such as e-commerce, dynamic websites, database management, multimedia displays, and internal networks. ASP is simple and easy to maintain, making it a choice for small page applications. In some cases, it can even be implemented for medium-sized enterprise applications.
Analysts wrote, "We believe that the next catalyst for Microsoft's stock price will be evidence that key artificial intelligence related product cycles are gaining momentum through incremental growth indicators such as M365 Copilot users, or by accelerating commercial Office ASP (from the current 6% to 7%)."
Looking at the breakdown, Bank of America predicts that due to good growth in its commercial office business, the department's revenue will increase by 11.5% year-on-year, soaring to $19.5 billion.
Although Microsoft's stock price is 37 times the expected free cash flow for 2025, Bank of America expects Microsoft's valuation to remain stable, driven by the booming artificial intelligence market. Analysts predict that the artificial intelligence market will grow to $944 billion by 2027.