An analyst says that Microsoft is likely to be worth $4 trillion. How to Do It.

Monday, Microsoft stock was going up thanks to a bullish call from Pierre Ferragu, an analyst at NewStreet Research.

The price of shares went up by 0.7%, to $426.68.

Ferragu, who writes about many tech companies, officially started to cover Microsoft with a Buy rating and a $570 price target. That’s a 34% rise from Friday’s closing price of $423.85, which would make the world’s most valuable company worth more than $4 trillion.

Microsoft has a market value of $3.17 billion. Apple is in second place with $2.99 trillion, and Nvidia is in third place with $2.92 trillion.

According to Ferragu’s 98-page research report about the call, Microsoft shares have gone up 12 times in value over the last 10 years. This trend began when Satya Nadella took over as CEO from Steve Ballmer in February 2014 and the company began a strong push into cloud computing.

Ferragu said that during that time, Microsoft’s sales have tripled, its earnings per share have quadrupled, and its price-to-earnings ratio on current year earnings has gone from 11 times to about 33 times.

“This performance can be explained by excellent execution on two fronts,” Ferragu wrote. “Microsoft first added cloud-based features to existing franchises and made money off of it by switching to subscriptions.” Second, the company used its unique go-to-market and ecosystem advantages to make Cloud services more accessible to everyone. This was the perfect way to execute, as it led to higher profits and steady market share gains.

He also said that Microsoft’s move to the cloud has created “strong legacy franchises” that “have the potential to grow revenues and profits in teens in the foreseeable future.” He wrote that this is enough reason for long-term investors to buy Microsoft.

But he said that the rise of Gen AI makes the story more interesting.

Fordgu thinks that Microsoft is “well positioned” in AI because it has “a strong partnership with the strong technology” through its partnership with OpenAI. He said that Gen AI “could boost growth by several points every year for many years.”

Ferragu also says that Microsoft shares don’t have much downside risk because its core businesses are strong, even if the AI story fails in the long run.

The analyst said that his estimates for the fiscal year ending in June 2027 are 5% higher than the consensus for revenue and 6% higher than the Street for earnings per share. This suggests that valuation multiples will continue to grow.

“Microsoft has done a great job of making money over the last 10 years by mastering the move to the cloud and subscriptions, strengthening existing franchises, and creating Azure, which now brings in 60% of the group’s profit growth,” Ferragu said.

“Microsoft is well-positioned to benefit from the rise of Generative AI going forward, while existing franchises continue to deliver good growth. The company stands to gain a lot if the technology works well, and it stands to lose little if it doesn’t.”