Can Microsoft Stock Reach $1,000? (2024)

In this article, I delve into whether Microsoft's stock could potentially reach $1,000 per share. I analyze Microsoft's dominant market position, recent financial performance, growth catalysts, risks and expert opinions to evaluate the feasibility of this ambitious target.

Microsoft’s Market Position

Founded in 1975, Microsoft (MSFT) has grown into a technology powerhouse with a market capitalization exceeding $3.2 trillion, trailing only Apple ($3.7 trillion).

Looking at the , as replicated in the holdings of the SPDR S&P 500 ETF Trust  SPY , Microsoft commands the dominant position with 7.3% of the portfolio. The company continues to stand tall against the likes of Apple and Nvidia. Apple has a 6.7% weight among the and Nvidia is third with 6.6% portfolio allocation and a $3.0 trillion market cap (a big part of NVDA’s growth is attributable to the past year and a half, courtesy the AI-driven surge).

Microsoft is one of the best stocks when it comes to investing in the technology sector.

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MSFT Stock’s Historical Performance

Microsoft has a robust track record of performance driven by its leadership in software and cloud services. This is reflected in the robust performance and investor returns from investment into Microsoft stock.

MSFT stock closed at $456.73 per share on July 1, gaining more than 21% in the first half of the year. The stock’s trajectory reflects consistent growth over the years amid strategic expansions and successful product launches.

Let’s dig into the company’s financial health, growth catalysts and risks to assess whether Microsoft’s stock price outlook can justify the $1,000 mark any time soon.

Current Financial Health And Performance

Microsoft operates through three primary segments: Productivity and business processes, intelligent cloud, and personal computing. These segments encompass a vast array of products and services, including Office 365, Azure cloud services, Windows OS and Xbox.

In its fiscal 2024 third-quarter Microsoft reported stellar results, bolstered by strong performances in Azure and AI-driven initiatives. Azure revenue surged 31% year over year, driven by increased adoption and enterprise migrations to the platform. The company maintains a solid financial footing with strong cash flows and ongoing investments in research and development.

Wall Street watchers expect the company to report another beat and raise on July 25, when it reports fourth-quarter earnings.

Potential Growth Catalysts

Microsoft's growth prospects are underpinned by several catalysts, including the widespread adoption of its AI-powered Copilot across multiple platforms.

Integration of AI technologies into Azure and productivity tools enhances Microsoft's competitive edge, driving anticipated revenue growth.

AI-enabled devices and continued expansion in cloud computing services also offer significant revenue potential to the company.

Challenges And Risks To Consider

Despite its strong position, Microsoft faces challenges such as intensifying competition in cloud computing and potential regulatory scrutiny.

Valuation concerns persist, with MSFT stock trading at approximately 40 times trailing 12-month earnings, indicating high investor expectations for sustained growth.

Microsoft’s AI Focus And ChatGPT Partnership

A pivotal aspect of Microsoft's strategy is its partnership with OpenAI, which began with a $1 billion investment aimed at advancing AI capabilities. This collaboration has led to the development and integration of ChatGPT, an advanced language model deployed across Microsoft's ecosystem. ChatGPT enhances user interaction within products like Office 365 and Teams, exemplifying Microsoft's commitment to leveraging AI for productivity and innovation.

Analysts’ Predictions

Analysts generally maintain a positive outlook on Microsoft, highlighting its leadership in cloud computing and ongoing innovation in AI as primary drivers of future stock performance. Price targets vary, but many analysts view Microsoft as a compelling long-term investment given its strategic initiatives and market leadership.

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Can Microsoft Stock Reach $1,000?

Achieving a $1,000 share price for Microsoft stock would necessitate sustained revenue, growth, successful execution of AI and cloud strategies, and favorable market conditions. While current valuations reflect optimism, reaching this milestone hinges on Microsoft's ability to capitalize on technological innovations and maintain competitive advantages.

The stock reaching a $1,000 per share price implies more than 120% upside from current levels. This appears unobtainable considering analysts' consensus for Microsoft stock price is currently at $490 (indicating a 7.5% upside from current levels).

While price targets vary from $430 to $600, given the prevailing macroeconomic conditions and specific business risks such as competition and segment slowdowns, anticipating a $1,000 stock price for MSFT may be overly optimistic, particularly in the near term.

Comparatively, Microsoft's current P/E ratio is 39x, quite above the peer average of 32.6x (taking Invesco QQQ ETF QQQ as benchmark for peer average). It's noteworthy that tech sector P/E ratios are currently elevated, with a year-to-date price increase of approximately 18% for the sector (using the QQQ as a benchmark).

Therefore, relying on P/E comparisons with other major tech firms like Oracle (ORCL), Meta Platforms (META), Apple (AAPL) and Alphabet (GOOGL) might not sustainably reflect valuations over the next 12 months. As market conditions stabilize, P/E ratios are likely to normalize somewhat.

Considering MSFT's historical five-year average P/E around 32 according to YCharts, a 12-month target price calculation based on the consensus EPS estimate of 12.64 for fiscal year 2024 suggests a target of approximately $405 per share, assuming a P/E of 32x.

Also, exploring the peak potential upside for MSFT stock with a P/E of 36 and EPS of 14, resulting in a stock price of $504 per share. However, this remains way below the envisioned $1,000 per share potential we are considering.

Bottom Line

While a $1,000 price target for Microsoft stock might seem ambitious, is Microsoft a worthwhile investment? For long-term investors, the answer is a resounding yes. Microsoft stands out as a strong choice for moderate to conservative investors, having generated impressive total returns of 237% over the past five years.

Its consistent quarter-over-quarter financial performance, supported by a robust balance sheet and favorable financial metrics, underscores its ability to reward shareholders. Improved margins and strong earnings growth further bolster its appeal. Strategic investments in emerging and growing areas such as AI, are expected to sustain its market position, while substantial free cash flows provide resilience against market fluctuations.

Despite its 19-year track record of dividend payments, income-oriented investors may find MSFT less appealing due to its modest average dividend yield of under 1%, with other tech stocks like IBM, QCOM, INTC and ORCL offering potentially higher dividend yields.

Microsoft remains a leader in technology innovation and cloud services, positioning itself for continued growth despite concerns about valuation.

Investors are advised to monitor key performance indicators and market trends closely to gauge MSFT's progress towards potentially reaching $1,000 per share.

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The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download Forbes' most popular report, 12 Stocks To Buy Now.