By
Godfrey Benjamin
April 18th, 2024
This price surge which is set to kick in on March 1, 2022, will put a major uptick on Microsoft’s revenue and profit. Analysts have upgraded their targets for the MSFT stock.
On Monday, August 23, Microsoft Corp (NASDAQ: MSFT) stock hit its record high levels by the closing hours. The MSFT stock was trading at $304.65 and a market cap of a record $2.29 trillion.
This happened as the software computing giant announced a price hike for its Office 365 subscription. The productivity apps of Microsoft Office are the companies top products in terms of sales. Thus, the price hike will provide a boost to Microsoft’s top-line as well as bottom-line.
In an official announcement last week, Microsoft 365 corporate vice president Jared Spataro wrote:
This is “the first substantive pricing update since we launched Office 365 a decade ago. This updated pricing reflects the increased value we have delivered to our customers over the past 10 years”.
The Microsoft 365 bundle, previously Office 365, now also includes the Teams communication app. Besides, it also has the Whiteboard collaboration app along with the Power Platform application development tolls for non-developers. All the price surge will come into effect starting March 1, 2022.
Microsoft (NASDAQ: MSFT) has been one of the top performers in the tech sector so far in 2021. Its only competitor in the Big-Tech space is Alphabet Inc (NASDAQ: GOOGL) which has gained 60% year-to-date.
Expert Views On MSFT Stock
As said, Office 365 has always been one of the top-selling products from Microsoft. This single product contributed to 18% of total sales for Microsoft for the fiscal year ending June 30. In a note on Sunday, the Goldman Sachs team led by analyst Kash Rangan wrote:
“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 price of the Office 365 E5 subscription will surge by 9% per user per month. However, the costs for the more affordable Office 365 E1 will shoot by 25%. In the note, Rangan further added: “In our view, price increases could be aimed at driving further migration up to premium E3 and E5 SKUs as the percentage increases are lower for more premium tiers, increasing the relative value proposition of premium SKUs”.
Analysts at UBS and Mizuho Group have updated their price targets for the MSFT stock. The new price update is $350, up from the previous $325. Cowen analysts led by J. Derrick Wood said: “We anticipate more clarity on the price increases on the company’s 1Q22 earnings call (late October)”.