Since the industrial revolution of the late 1700s, technology has informed and driven a number of radical changes in our societies and economies. The pace has increased in recent decades, as the world went digital and now AI is powering the so-called fourth industrial revolution, based on a rapid exchange of data and information.
Against this backdrop, technology stocks have led the way in market gains. The tech-heavy NASDAQ is up 43% last year and the S&P 500 is up 24%. Both indexes are continuing to post strong numbers this year; for 2024 from the current year, they have increased by 24% and 17% respectively.
That has Wedbush analyst and tech expert Daniel Ives bullish on tech stocks, noting, “The first half of 2024 has been a very strong run for tech stocks led by supporters of Big Tech Nvidia, Microsoft, Amazon, Meta, as this 4th Industrial Revolution has just begun to play out in our view at this Moment of 1995 (not 1999) with many bears still screaming from their hibernating caves… We believe the NASDAQ has another strong 2H ahead as tech stocks will rise 15% the rest of 2024 in our view with tech fundamentals accelerating as AI use cases expand materially.”
Against that backdrop, we’ve opened up the TipRanks database to look up two of Ives’ stock picks — well-known tech giants — and see how his stances line up with the Wall Street consensus. Here are the details.
Microsoft (MSFT)
First on our list, Microsoft has led the field in PCs and operating systems since the 1970s and has become one of the most iconic brand names in the world. In recent years, the company, based in Redmond, Washington, has continued its long commitment to the advancement of technology, taking a strong position at the leading edge of the field of artificial intelligence. Microsoft has a long-standing interest in AI and was an early supporter of OpenAI, the company that brought us generative AI and GPT Chat in late 2022. The company’s cumulative investment in OpenAI is around $10 billion.
From a user perspective, Microsoft has some very notable AI initiatives. These include the integration of generative AI technology into the Bing search engine in an effort to make Bing more user-friendly, with an improved interface and search results, aiming for stronger competition with Google. Also, Microsoft is incorporating AI into updates to its Windows and Office software packages. Prominent among these additions to iconic software products is Copilot, Microsoft’s new AI-powered online assistant. Copilot is designed to provide real-time user assistance informed by user work history and content creation.
Perhaps the largest-scale use of AI in Microsoft’s product delivery can be found in its cloud computing platform, the Azure subscription service. Azure is a suite of cloud-based applications and tools, for more than 200, and Microsoft is incorporating AI into the platform – customers will be able to choose AI-enhanced versions of Azure applications. The move promises to make Azure a more user-friendly product with greater flexibility, and make the platform a stronger competitor to Amazon’s AWS and Google Cloud.
A look at Microsoft’s latest financial report, which covered the third fiscal quarter, shows that AI improvement in Azure is paying off. Azure is part of Microsoft’s Intelligent Cloud segment, which generated $26.7 billion in revenue for the quarter, up 21% year over year and 43% of the quarterly top line. The company’s total revenue for the fiscal third quarter rose 17% year over year to $61.9 billion, beating forecasts by $1.01 billion. Ultimately, Microsoft saw earnings of $2.94 per share, a figure that was 11 cents per share better than expected — and up 20% from the year-ago period.
Shares in Microsoft have shown strong performance over the past year; not surprising given the solid financial results. The stock has gained 42% in the past 12 months and is up almost 25% so far this year.
For Ives, the key point here is AI’s potential to unlock additional benefits as MSFT moves forward. He writes, “We believe the stock should still be priced in what we see as the next wave of cloud and AI growth coming into Redmond’s history with a strong competitive edge against Amazon in particular and Google -it in the clouds. Our recent partner checks have been increasingly robust around Copilot deployments with MSFT customers and ultimately we estimate this could add another ~$25B to Redmond’s topline trajectory by FY25. Here’s the key, as the ripple effect of the multiplier from AI Godfather Jensen and Nvidia is just starting to be felt in the cloud/software layer as the 2nd derivatives of the AI Revolution are emerging on the ground.”
The tech expert continues to give Microsoft stock an Outperform (Buy) rating, along with a $550 price target, suggesting a one-year upside potential of 18%. (To see Ives’ record, click here)
This venerable technology firm has received 33 recent analyst reviews, with a skewed split of 32 Buys to 1 Hold giving the stock a consensus rating of Strong Buy. The stock is priced at $464.98, and the average price target of $500.55 implies it will gain 7.5% in the next year. (See MSFT stock forecast)
Salesforce.com (CRM)
Next is Salesforce, a household name in the field of customer relationship management, or CRM. Salesforce gives a good definition of CRM, describing it as a system for managing a company’s interactions with all customers, current and potential, with the simple goal of improving relationships and expanding business.
Salesforce has been in the CRM business since 1999 and has perfected the system. The company offers an industry-leading, cloud-based software platform that streamlines CRM activities, including sales calls, marketing emails and customer service interactions. The platform tracks these interactions and builds a unified database of customer and company information.
In recent years, Salesforce has integrated AI technology into its CRM software products, further enhancing the abilities of developers and users to customize the platform, tailoring it to any scale or business goal. The company’s AI integration simplifies data retrieval, improves communications, automates repetitive tasks and generates actionable insights through autonomous data analysis. Salesforce is also using generative AI for automated creative purposes — generating personalized communications with customers, including targeting marketing contacts and determining the best time to launch them.
Salesforce over the years of operation has made itself an essential part of the business universe, providing a necessary service, based on the latest technology and delivering solid results to its customers.
As for Salesforce’s results, the company reported its 1Q25 financial release in late May and beat forecasts for revenue while missing revenue. The company’s revenue came in at $9.13 billion, up almost 11% from a year ago, but $20 million less than expected. The bottom line was reported as $2.44 on a non-GAAP measure, up 44% year-over-year – and beating estimates by 7 cents per share.
The company reported several additional metrics that should pique investor interest, including $8.59 billion in subscription and support revenue, a 12% year-over-year increase and a key driver of overall revenue growth. Free cash flow rose in the quarter, up 43% year over year to $6.08 billion. Salesforce ended the quarter with $9.96 billion in cash and liquid assets as of April 30 of this year.
While those results were solid, shares in Salesforce fell sharply after the release — largely when the second-quarter forecast failed to impress. The company’s estimates for both revenue and earnings in the second quarter were below consensus estimates. Currently, the stock is flat for the year to date.
Dan Ives, in his coverage of Salesforce, takes an investor’s perspective—and he’s impressed by the company’s current capabilities and near-term potential. Ives writes of Salesforce, “In our view, CRM is on a path to a higher growth, margin and FCF trajectory and this is just a small bump in the road during a transitory period of growth… CRM [remains] one of our favorite tech names to own over the next year as the story of AI begins to take shape. We would be buyers on the downside… after seeing the forest through the trees, this is a turnaround for a strong technology powerhouse with a massive installed base led by one of the best CEOs in the global tech landscape according to our point of view.”
Going forward with these comments, Ives rates CRM as Outperform (Buy), with a price target of $315 suggesting a 21% gain in the coming months.
There are 40 recent analyst reviews on record for Salesforce stock, and they break down to 29 buys, 10 holds, and 1 sell, giving the stock its consensus rating of Moderate Buy. The stock is priced at $259.81, with an average target price of $297.11 indicating the potential for a 14% upside over a one-year horizon. (See CRM Stock Forecasting)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your due diligence before making any investment.