Microsoft ( MSFT ) shares reached a buy point on Friday after the company announced it is adding artificial intelligence tools to its popular Office productivity applications.
The software giant based in Redmond, Wash. on Thursday introduced Microsoft 365 Copilot. Microsoft is embedding Copilot features into programs that many workers use every day, including Word, Excel, PowerPoint, Outlook and Teams.
Copilot uses next-generation AI to automate and simplify tasks. Further, the software is currently in testing with selected business customers. But Microsoft did not detail how it intends to monetize Copilot.
Microsoft also announced Business Chat. The new experience works across Office applications and a client’s calendar, emails, chats, documents, meetings and contacts to do things people couldn’t do before.
For example, with natural language prompts like “tell my team how we updated the product strategy,” Business Chat will generate a status update based on the morning’s meetings, emails and chat threads, Microsoft said.
Microsoft stock surges on AI News
“By being grounded in your business content and context, Copilot delivers results that are relevant and actionable,” Jared Spataro, Microsoft corporate vice president for modern work and business applications, said in a press release. “It’s enterprise-ready, built on Microsoft’s comprehensive approach to security, compliance, privacy and responsible AI. Copilot marks a new era of computing that will fundamentally transform the way we work.”
In morning trading on the stock market today, Microsoft shares jumped 2.3% to 282.65. Also, Microsoft shares broke out of a flat base at a 276.86 buy point with the move, according to IBD MarketSmith charts.
Copilot Called Great Productive 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 on Microsoft shares and raised his price target to 315 from 300.
“Microsoft 365 Copilot will be a big productivity improvement for users,” he said. “We continue to see very broad AI applicability for Microsoft across consumer and enterprise use cases.”
At a presentation on Thursday, Microsoft showed how Copilot can generate content from work files with simple voice or text commands. Examples included “create a slide show,” “analyze sales data,” and “prioritize my email inbox.”
It Will Be Hard For Rivals To Match
Microsoft 365 Copilot will be very difficult for rivals to copy, Oppenheimer analyst Timothy Horan said in a note to clients. First, Microsoft has a huge user base of 1.5 billion. It also has access to OpenAI technology.
Further, he noticed that Alphabet (GOOGL) unit Google and Salesforce (CRM) had “me-too” announcements timed with Microsoft’s presentation.
Deutsche Bank analyst Brad Zelnick maintained his buy rating on Microsoft shares after the event.
“As the system matures, we are optimistic that Microsoft 365 Copilot will be widely ingrained 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 is an important principle 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 on Microsoft shares but raised his price target to 275 from 250.
Microsoft still has hurdles to overcome with Copilot, he said. They include monetizing the technology and proving its usefulness in practice.
“The apparent productivity gains of the technology – which can create presentations, filter and summarize emails, edit Word documents, create Excel templates and much more – looked to be material and the demo probably impressed even the biggest of skeptics,” Keirstead said. in one note to customers.
Meanwhile, Microsoft stock is in the IBD Long-Term Leaders Portfolio.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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