Since the Industrial Revolution of the late 18th century, technology has influenced and driven a series of radical changes in our societies and economies. The pace has accelerated in recent decades as the world has become digital, and AI is now powering what is known as the Fourth Industrial Revolution, based on the rapid exchange of data and information.
In this context, technology stocks have been the best performers on the market. The tech-heavy NASDAQ rose 43% last year, and the S&P 500 rose 24%. Both indices continue to perform well this year; since the beginning of 2024, they are up 24% and 17%, respectively.
This makes Daniel Ives, an analyst and technology expert at Wedbush, bullish on tech stocks, noting: “The first half of 2024 has been a very good period for tech stocks led by Big Tech stalwarts Nvidia, Microsoft, Amazon, Meta, as this 4th Industrial Revolution has just started to play out in our view in that 1995 (not 1999) moment with many bears still screaming from their hibernation caves… We think the NASDAQ has another strong second half ahead of it as tech stocks are up 15% over the remainder of 2024, in our view, with tech fundamentals set to accelerate as AI use cases expand dramatically.”
With that in mind, we opened up the TipRanks database to look up two of Ives’s picks — well-known tech giants — and see how his picks stack up against the Wall Street consensus. Here are the details.
Microsoft (MSFT)
Topping our list, Microsoft has been a leader in PCs and operating systems since the 1970s and has become one of the most iconic brands in the world. In recent years, the Redmond, Washington-based company has continued its long-standing commitment to advancing technology, taking a strong position at the forefront of the field of artificial intelligence. Microsoft has long been interested in AI and was an early backer of OpenAI, the company that brought us generative AI and Chat GPT in late 2022. The company’s cumulative investment in OpenAI is in the $10 billion range.
From a user perspective, Microsoft has several highly visible AI initiatives. These include integrating generative AI technology into the Bing search engine, with the goal of making Bing more user-friendly, with an improved interface and search results, in an effort to further compete with Google. Microsoft is also integrating AI into updates to its Windows and Office software packages. Among these additions to flagship software products is Copilot, Microsoft’s new AI-powered online assistant. Copilot is designed to provide real-time user assistance, informed by the user’s work and content creation history.
Perhaps the most significant use of AI in Microsoft’s product delivery is in its cloud computing platform, the Azure subscription service. Azure is a collection of cloud-based applications and tools, more than 200 in total, and Microsoft is building AI into the platform. Customers will be able to choose AI-enhanced versions of Azure applications. The move promises to both 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 quarter of fiscal 2024, shows that the AI upgrade to 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% from a year earlier and accounting for 43% of quarterly revenue. The company’s total revenue for the fiscal third quarter increased 17% from a year earlier to $61.9 billion, beating expectations of $1.01 billion. Ultimately, Microsoft reported earnings of $2.94 per share, which was 11 cents per share above expectations and up 20% from the year-earlier period.
Microsoft shares have performed well over the past year, which is not surprising given its strong financial results. The stock has gained 42% over the past 12 months and is up nearly 25% year to date.
For Ives, the key point here is the potential for AI to drive incremental gains as MSFT moves forward. He writes: “We believe the stock has yet to price in what we see as the next wave of cloud and AI growth that is coming to the Redmond story with a strong competitive advantage over Amazon in particular and Google in the cloud space. Our recent partner checks have been incrementally strong around Copilot deployments with MSFT customers and, over time, we estimate this could add ~$25 billion incremental to Redmond’s revenue trajectory by FY25. This is key as the multiplier impact of AI godfather Jensen and Nvidia is only just beginning to be felt on the cloud/software layer as the second derivatives of the AI revolution play out on the ground.”
The tech expert then gives Microsoft shares an Outperform (Buy) rating, along with a $550 price target, suggesting a one-year upside potential of 18%. (To watch Ives’ track record, click here)
This venerable tech company recently garnered 33 analyst reviews, with a lopsided split of 32 Buys to 1 Hold, giving the stock a Strong Buy consensus rating. The stock is trading at $464.98, and its $500.55 average price target implies it will gain 7.5% over the next year. (See MSFT Stock Forecast)
Salesforce.com (CRM)
Then there is Salesforce, a well-known 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 growing the business.
Salesforce has been in the customer relationship management (CRM) industry since 1999 and has perfected its system. The company offers an industry-leading cloud-based software platform that streamlines customer relationship management (CRM) activities, including sales calls, marketing emails, and customer service interactions. The platform tracks these interactions and creates a unified database of customer and business information.
In recent years, Salesforce has integrated AI technology into its CRM software, further enhancing the ability of developers and users to customize the platform, adapting it to any scale or business objective. The company’s integration of AI streamlines data retrieval, improves communications, automates repetitive tasks, and generates actionable insights through autonomous data analysis. Salesforce also uses generative AI for automated creative purposes: generating personalized customer communications, including targeting marketing contacts and determining the best time to publish them.
Salesforce has established itself, over its years of operation, as an essential part of the business world, by offering a necessary service, based on the latest technology, and by delivering solid results to its customers.
As for Salesforce’s results, the company reported its fiscal first quarter 2025 financial results in late May and beat earnings forecasts but missed revenue expectations. The company reported revenue of $9.13 billion, up nearly 11% from a year earlier, but $20 million below expectations. Net income was $2.44 on a non-GAAP basis, up 44% year-over-year, beating estimates by 7 cents per share.
The company reported additional numbers that should pique investor interest, including $8.59 billion in subscription and support revenue, up 12% year over year and the primary driver of overall revenue growth. Free cash flow increased 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 on hand, as of April 30 of this year.
While the results were good, Salesforce shares fell sharply after the release, mainly because its second-quarter guidance was not convincing. The company’s estimates for second-quarter revenue and earnings came in below consensus estimates. The stock is currently flat year-to-date.
Dan Ives, in his article on Salesforce, takes an investor’s perspective and says he is impressed with the company’s current capabilities and its near-term potential. Ives writes of Salesforce: “In our view, CRM is on a path to higher growth, margin, and free cash flow and this is just a small bump in the road during a transitional growth period…CRM (remains) one of our favorite tech names to own over the next year as the AI story begins to take shape. We would be buyers on weakness…because seeing the forest through the trees, this is a turnaround for a leading tech stalwart with a massive installed base led by one of the best CEOs in the global tech landscape in our view.”
Based on these comments, Ives rates CRM an Outperform (Buy), with a $315 price target that suggests a 21% gain in the coming months.
There are 40 recent analyst reviews of Salesforce stock, with 29 Buys, 10 Holds, and 1 Sell, giving the stock a Moderate Buy consensus rating. The stock is listed at $259.81, with an average price target of $297.11 that indicates a 14% upside potential over the next year. (See CRM Inventory 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 own analysis before making any investment.