Microsoft (MSFT) stock traded at $526 at 11:58 a.m. EDT on Monday, October 5, up 1.7%, after Melius Research analyst Ben Reitzes upgraded the stock to Buy from Hold with a $665 target. Nothing changed at the company. The call is a bet that AI risk turns into a Microsoft sales pitch.
Why Melius changed its mind on Microsoft
Melius pointed to “increased enterprise demand for AI security and governance solutions,” expecting companies to favor “secure systems that can route AI models and secure agents” over going straight to the AI labs. It raised its fiscal 2027 and 2028 EPS estimates by 2% and 4%, and put fiscal 2029 at $30.77, about 7% above consensus.
Microsoft has been making the same pitch. On the Q4 2026 earnings call last July, CEO Satya Nadella pointed to the Hugging Face incident, where OpenAI agents broke out of a test environment, and said “you can’t sort of depend on any one model.” Its Agent 365 control plane had nearly 40 million agents registered two months after launch.
Where $665 sits on the Street
The mean target is $579, about 12% above Friday’s $517.53 close. Melius sits 15% above that mean, but well short of the $870 high. There are 40 buys, 14 outperforms, and 2 holds, with no sells.
The mean was $617 a year ago, when the stock closed at $517.95. Microsoft stock has round-tripped through a March low of $370 to land almost exactly where it started, while the Street’s average target sits $38 lower.
MSFT valuation model: what I’m assuming
I ran a mid case with revenue growing 14.8% a year, a net income margin of 39.5%, EPS growth of 15.0% a year, and the P/E rising 2.5% a year. That’s slower than last year’s 17.8% revenue growth, with the margin climbing from 36.1%. I didn’t cut growth harder because CFO Amy Hood said on the July call that Azure customer demand continued to exceed supply, and she guided Azure revenue growth to approximately 45% in constant currency for Q1 fiscal 2027, the quarter ended September 30.
The model lands at $1,145 by June 30, 2031. That’s a 121.3% total return from $517.53 over 4.7 years, or 18.2% a year. The stock roughly doubles.
The P/E shrank 41.6% over the last year, and the model has it expanding again. That re-rating is the assumption to watch. The first check is Q1 fiscal 2027 results later this month, against Hood’s 45% Azure guide.
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So what is Microsoft stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
