Microsoft stock hits fresh record after announcing Office 365 price hikes
Microsoft Corporation Chief Executive Officer, Satya Nadella, gestures as he addresses the Future Decoded Tech Summit in Bangalore on February 25, 2020. (Photo by Manjunath Kiran / AFP) (Photo by MANJUNATH KIRAN/AFP via Getty Images)
Microsoft shares closed at a fresh record Monday, as more analysts recognized the financial implications of the software and hardware maker’s decision to lift the price of certain Office 365 productivity software subscriptions for businesses next year.
Shares closed at $304.65 for the day, giving the company a market cap of nearly $2.3 trillion. Microsoft shares are up about 37% for the year, outpacing most of its large tech rivals. Google-parent Alphabet has notched gains of nearly 60% year to date, however.
Analysts haven’t been quick to update their estimates, but many said the price change has the potential to boost revenue for a foundational part of the company — along with profit — that the costs of providing Office 365 services to customers are already factored into Microsoft’s operations.
Commercial subscriptions to Office 365 represented about 18% of Microsoft’s revenue in the fiscal year that ended on June 30, a Goldman Sachs team led by analyst Kash Rangan wrote in a Sunday note.
“We believe the recent announcement highlights the company’s strong competitive positioning and long-term pricing power, helping drive continued ARPU growth through CY22 as well as help drive continued SKU migration to E3 and E5,” the group wrote.
The price for one type of subscription, the premium Office 365 E5, is increasing by 9% per user per month starting March 1, 2022, while the cost of the more affordable Office 365 E1 will go up by 25%.
Why Microsoft’s Stock Is Trading Higher Today
Microsoft Corporation (NASDAQ: MSFT) shares are trading higher after Wedbush maintained an Outperform rating on the stock and raised its price target from $325 to $350.
Wedbush analyst Daniel Ives believes ‘the Office 365 price increase for 2022 was a smart strategic poker move that could be another $5 billion+ incremental tailwind for Redmond in 2022, giving more confidence that numbers could continue to move up higher looking ahead.’
The analyst also noted ‘Microsoft remains our favorite large cap cloud play and we believe the stock will move higher into year-end as the Street further appreciates the cloud transformation story in Redmond.’
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide.
Microsoft’s stock was trading about 2.5% higher at $304.18 per share on Friday at the time of publication. The stock set a new 52-week high of $305.84 and has a 52-week low of $196.25.
Latest Ratings for MSFT
Aug 2021 Wedbush Maintains Outperform Jul 2021 JP Morgan Maintains Overweight Jul 2021 Credit Suisse Maintains Outperform
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This Is Why Microsoft and Nvidia Were Up on Friday
In today’s video I look at Nvidia’s (NASDAQ:NVDA) and Microsoft’s (NASDAQ:MSFT) most recent news and share my thoughts from a bullish and bearish perspective. Here are some highlights from the video:
Nvidia reported its strong second-quarter earnings after the market closed on Aug. 18. Days after reporting earnings, Nvidia continues to be upgraded by numerous investment analysts, causing bullish momentum on the stock price. Regarding the ARM acquisition by Nvidia, U.K. regulators have determined that there might be anticompetitive difficulties if the deal goes through and that they need more time to do a full investigation. The deal was scheduled to close in the early months of 2022, but a complete study by U.K. regulators could push this out further than expected. Microsoft is increasing the price of its 365 products. The increases in price will range from as low as 8.6% to as high as 25% and will take effect on March 1, 2022. Office commercial and cloud products make up a healthy portion of Microsoft’s revenue, and investors are very excited about the extra income from the price hikes.
Click the video below for my full thoughts and analysis.
*Stock prices used were the midday prices of Aug. 20, 2021. The video was published on Aug. 20, 2021.