Microsoft (MSFT) Stock Has Lagged the Market. BofA Says That Could Change Soon

TLDR

• Bank of America raised its Microsoft price target to $600 from $500, maintaining a Buy rating
• Azure cloud growth accelerated to 43% in Q4 fiscal 2026, up from 39% the prior quarter
• Azure guidance for Q1 fiscal 2027 is set at 45% growth
• Paid Microsoft 365 Copilot seats topped 30 million, with net additions more than doubling quarter-over-quarter
• MSFT stock is up 4.2% year-to-date but has lagged the S&P 500’s nearly 12% gain this year

Microsoft (MSFT) stock has gone largely nowhere over the past year, but Bank of America thinks that’s about to change. The bank’s analyst Tal Liani raised his price target on MSFT to $600 from $500 on Tuesday, keeping his Buy rating intact. That new target sits 19% above where the stock was trading on Tuesday at $502.43, down 1% on the day.

Microsoft Corporation, MSFT

The stock is up just 4.2% this year and down 0.5% over the past 12 months. The S&P 500 has gained nearly 12% in that same stretch, so Microsoft has been a laggard. Liani thinks the numbers now justify a re-rating.

The core of his argument is Azure. Growth in Microsoft’s cloud platform accelerated to 43% in the fiscal fourth quarter ended June 30, up from 39% in the prior quarter. The company has guided for 45% growth in Q1 fiscal 2027, which would mark another step up.

Copilot is doing its part too. Paid Microsoft 365 Copilot seats surpassed 30 million, and net seat additions more than doubled quarter-over-quarter. Remaining performance obligations jumped 84% year-over-year, a figure that points to strong future revenue.

Azure Moves From Thesis to Numbers

BofA’s revised price target is based on 28 times its calendar year 2027 earnings estimate, up from 24 times previously. The firm says that adjustment reflects faster cloud growth and better visibility into returns on Microsoft’s AI investment.

Liani noted that Microsoft is building a wide portfolio of AI models, letting customers pick the most cost-effective option for each task.

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“Not every workload requires a complex and expensive frontier model, and Microsoft’s approach helps optimize performance while reducing token consumption,” he wrote.

Morgan Stanley’s Adam Wood agrees. He reiterated his own $600 price target at the end of July after fiscal Q4 earnings, writing that the “growth thesis” is “taking shape.” Wood also flagged that Microsoft held its margins even as AI spending climbed, which matters as capital expenditures hit around $41 billion in Q4 alone and $145 billion for the full fiscal year.

Wall Street Lines Up Behind MSFT

The broader analyst community is on board. Of 60 Wall Street firms tracked by FactSet, the average rating on MSFT is Buy with a consensus price target of $565.88. BofA’s $600 target now sits at the higher end of that range.

Seventeen analysts have revised their earnings estimates upward for the coming period, according to InvestingPro. The stock currently trades at a P/E of 28.5 with a PEG ratio of 0.89, which InvestingPro flags as undervalued relative to growth.

Meta Platforms has become a major Azure customer, spending hundreds of millions annually on the platform. Moody’s recently affirmed Microsoft’s Aaa credit rating with a stable outlook.