by Microsoft (MSFT) reached a buy point Friday after the company announced it is adding artificial intelligence tools to its popular Office productivity applications.
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The Redmond, Washington-based software giant introduced Microsoft 365 Copilot on Thursday. Microsoft is integrating Copilot features into apps many employees use every day, including Word, Excel, PowerPoint, Outlook, and Teams.
Copilot uses advanced AI to automate and simplify tasks. Furthermore, the software is currently being tested with selected commercial customers. But Microsoft hasn’t detailed how it plans to monetize Copilot.
Microsoft also announced Business Chat. The new experience works across Office apps and a customer’s calendar, emails, chats, documents, meetings, and contacts to do things people couldn’t do before.
For example, with natural language prompts such as “tell my team how we updated product strategy,” Business Chat will generate a status update based on the morning meetings, emails and chat threads, Microsoft said.
Microsoft shares soar on AI news
“By anchoring itself to your business content and context, Copilot delivers results that are relevant and actionable,” Jared Spataro, Microsoft vice president of modern work and business applications, said in a press release. “It’s turnkey, built on Microsoft’s comprehensive approach to security, compliance, privacy, and responsible AI. Copilot ushers in a new computing era that will fundamentally change the way we work.”
During morning stock market trades today, Microsoft stock rose 2.3% to 282.65. Also, Microsoft stock broke out of a flat base at a buy point of 276.86 with the move, according to IBD MarketSmith charts.
Copilot named Big Productivity Enhancer
In a note to clients, Mizuho Securities analyst Gregg Moskowitz called Copilot “a leap forward in AI-driven productivity.”
Moskowitz also reiterated his buy rating for Microsoft stock and raised his price target from 300 to 315.
“Microsoft 365 Copilot will be a great productivity enhancer for users,” he said. “We continue to see very broad AI applicability for Microsoft across consumer and enterprise use cases.”
During a presentation on Thursday, Microsoft showed how Copilot can generate content from work files using simple voice or text commands. Examples included “create a slideshow,” “analyze sales data,” and “prioritize my email inbox.”
Will be hard for rivals to match
Microsoft 365 Copilot will be very hard to match for rivals, Oppenheimer analyst Timothy Horan said in a note to clients. First, Microsoft has a huge base of 1.5 billion users. It also has access to OpenAI technology.
He also noticed that Alphabet (GOOGL) unit Google and Sales team (CRM) had “me-too” announcements timed with Microsoft’s presentation.
Deutsche Bank analyst Brad Zelnick maintained his buy rating for Microsoft shares after the event.
“As the system matures, we are optimistic that Microsoft 365 Copilot will be widely embedded in workflows to drive productivity and business value,” Zelnick said in a report. “The focus on productivity or the ability to do more with less has long been a key tenet of Microsoft’s overall value proposition.”
Microsoft Stock is a long-term leader
UBS analyst Karl Keirstead took a more cautious stance. He maintained his neutral rating for Microsoft stock, but raised his price target from 250 to 275.
Microsoft still has hurdles to overcome with Copilot, he said. They include monetizing the technology and demonstrating its usefulness in practice.
“The technology’s apparent productivity gains — which allow creating presentations, filtering and summarizing emails, composing Word documents, creating Excel templates, and much more — seemed material, and the demo likely impressed even the biggest skeptics,” Keirstead said in a note to clients.
Meanwhile, Microsoft stock is in the IBD 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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