Microsoft (MSFT) shares reached a buy point on Friday after the company announced it would add artificial intelligence tools to its popular office productivity apps.
The Redmond, Wash.-based software company introduced Microsoft 365 Copilot on Thursday. Microsoft embeds Copilot functionality into applications that many workers use daily, including Word, Excel, PowerPoint, Outlook and Teams.
Copilot uses next-generation AI to automate and simplify tasks. Also, the software is currently in testing with select business customers. But Microsoft did not elaborate on how it intends to monetize Copilot.
Microsoft also announced Business Chat. The new experience allows people to do things they couldn’t do before with Office applications and clients’ calendars, emails, chats, documents, appointments and contacts.
For example, with natural-language prompts like “Tell my team how we updated the product strategy,” Microsoft says Business Chat can generate a status update based on morning meetings, emails and chat threads.
Microsoft shares surge in AI news
“Based on your business content and context, Copilot delivers relevant and actionable results,” said Jared Spataro, Microsoft’s corporate vice president for modern work and business applications. Press release. “It’s enterprise-ready, built on Microsoft’s comprehensive approach to security, compliance, privacy and responsible AI. Copilot represents a new era of computing that will fundamentally change the way we work.”
In midday trading on the stock market today, Microsoft shares advanced 0.5% to 277.53. Also, according to IBD MarketSmith Index, Microsoft stock broke out of a flat base at a buy point of 276.86.
Copilot is known as a big productivity enhancer
In a note to clients, Mizuho Securities analyst Greg Moskowitz called Copilot “a breakthrough in AI-driven productivity.”
Moskowitz reiterated his buy rating on Microsoft shares and raised his price target to 315 from 300.
“Microsoft 365 Copilot will be a huge productivity improvement for users,” he said. “We continue to see very broad AI applicability for Microsoft in both consumer and enterprise use cases.”
In a presentation on Thursday, Microsoft showed how Copilot can create content from work files with simple voice or text commands. Examples include “Create a slide presentation,” “Analyze sales data,” and “Prioritize my email inbox.”
Competitors will be hard to match
Microsoft 365 Copilot will be very difficult for competitors to follow, Oppenheimer analyst Timothy Horan said in a note to clients. For one, Microsoft has an enormous base of 1.5 billion users. It also has access to OpenAI technology.
Also, he noted letters (Google) Unit Google and Sales force (CRM) “Me-too” announcements were timed with Microsoft’s presentation.
Deutsche Bank analyst Brad Zelnick kept a buy rating on Microsoft shares after the event.
“As the system matures, we are confident that Microsoft 365 CoPilot will become more widely embedded in workflows to increase productivity and business value,” Zelnick said in a statement. “A focus on productivity, or the ability to do less, is a key tenet of Microsoft’s overall value proposition.”
Microsoft stock is a long-term leader
UBS analyst Carl Keirstedt took a more cautious stance. He maintained his neutral rating on Microsoft shares but raised his price target to 275 from 250.
Microsoft still has hurdles to overcome with GoPilot, he said. This includes monetizing the technology and demonstrating its utility in practice.
“The technology’s obvious productivity gains—we can create presentations, filter and condense emails, draft Word docs, create Excel templates, and more—demo impressed even the biggest skeptics,” said Keirstedt. Note to customers.
Meanwhile, Microsoft stock remains in IBD’s Long-Term Leaders portfolio.
Follow Patrick Seitz on Twitter @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.
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