Microsoft Stock Is Off Its Highs, But Target Prices for MSFT Are Higher

Core Viewpoint - Microsoft Corp (MSFT) stock has declined from its recent highs, creating a potential opportunity for value investors, with analysts projecting significantly higher target prices for the stock [1][4]. Group 1: Stock Performance - As of September 9, MSFT stock is trading at $499.28, down from a peak of $535.65 on August 4 [1]. - The current market cap of MSFT is approximately $3,711 billion [3]. Group 2: Financial Projections - Analysts forecast revenue of $322.15 billion for the fiscal year ending June 30, 2026, with an operating cash flow (OCF) margin of 53%, resulting in an OCF of $170.74 billion [3]. - After accounting for $71 billion in capital expenditures, the estimated free cash flow (FCF) is about $99.74 billion [3]. - With a projected 2% FCF yield, the market value of MSFT could approach $5 trillion, indicating a potential target price of $671.03 per share, which is 34.4% higher than the current price [3]. Group 3: Analysts' Target Prices - Various analysts have set target prices for MSFT, with an average of $613.89 from 56 analysts, $622.85 from Barchart, $565.35 from AnaChart, and $617.38 from Stock Analysis, all suggesting that MSFT is currently undervalued [4]. Group 4: Investment Strategy - A suggested strategy for investors is to short out-of-the-money (OTM) put options to establish a lower buy-in point while earning premiums [5][6]. - For instance, the $480.00 put option contract expiring on October 10 has a midpoint premium of $4.28 per contract, which is 4% below the current stock price [7].