Microsoft stock (MSFT) may be seen as undervalued according to some experts, following its fiscal second-quarter earnings report on January 29. Commercial bookings accelerated sharply from 23% year-over-year growth in constant currency last quarter to 75% growth this quarter based on surging Azure commitments from OpenAI and other large deals. Remaining performance obligations increased 36% year over year to $298 billion. The rising importance of AI to Microsoft is likely driving these boosts, which may help the company’s stock.
To start 2025, MSFT is down nearly 3%, as the company continues to struggle. However, experts may see this as a buying opportunity while Microsoft stock is low. Morningstar analysts are maintaining their fair value estimate for Microsoft at $490 per share, which would mark a new all-time high. “With shares down [after-hours], we continue to view the stock as attractive, and we think accelerating Azure revenue in the fourth quarter will help propel it higher over the next year.”
Will Microsoft Buying TikTok Bring Gains for the Stock?
In addition, another development that can lead to solid MSFT stock performance is a potential acquisition of TikTok. Late last month, Trump confirmed Microsoft’s interest while also noting the process is ongoing. The platform is incredibly popular, with over 170 million American users. Yet, ByteDance, its Chinese owner, has not commented on Microsoft, or any companies, acquisition interest. There is no denying that a sale would be huge for anyone, especially Microsoft. Such a purchase would likely mean heightened investor interest in MSFT stock, driving it upward.
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Furthermore, Morningstar analysts believe that near-term demand indicators are positive for Microsoft stock. Commercial bookings accelerated sharply from 23% year-over-year growth in constant currency last quarter to 75% growth this quarter based on surging Azure commitments from OpenAI and other large deals. Remaining performance obligations increased 36% year over year to $298 billion. “Renewals also remain strong, which we think is partly driven by high interest in AI and consistently good execution,” the analysts say.
“We envision stronger revenue growth ahead, as Microsoft’s prior decade was bogged down by the 2008 downturn, the evaporation of mobile handset revenue from the disposal of the Nokia handset business, and the onset of the model transition to subscriptions (which initially resulted in slower revenue growth). However, we believe macro and currency factors will pressure near-term revenues.”