MarketMoodz
Morgan Stanley Flags Two Beaten-Down Software Stocks; We Back Microsoft
Morgan Stanley advised buying two battered enterprise software names: Microsoft and Salesforce. CNBC’s coverage notes the authors agree on Microsoft but remain cautious on Salesforce, setting up a clear split in sentiment within the call. Both stocks have fallen sharply—MSFT about 17% and CRM around 20% in the last three months—even as AI-enabled tools sharpen the productivity case.
Key Takeaways
- Morgan Stanley flags Microsoft (MSFT) and Salesforce (CRM) as buys in beaten-down enterprise software
- MSFT is down about 17% and CRM roughly 20% over the past three months
- Azure growth beat estimates in Microsoft’s fiscal Q2, with capital expenses up about 66% year over year
- AI tools like Copilot (Microsoft) and Agentforce (Salesforce) could lift productivity and compress per-seat licenses, though pricing models may adapt
- CNBC notes a hold-equivalent on CRM and a maintained rating on MSFT, with Jim Cramer sentiment referenced
People Involved
- Satya NadellaMicrosoft CEO
- Amy HoodMicrosoft CFO
- Jim CramerCNBC Commentator
Entities Involved
- Microsoft Corp. (MSFT)Technology company
- Salesforce, Inc. (CRM)Cloud software company
MarketMoodz Analysis
The note’s contrarian thrust centers on Microsoft as a durable, blue-chip beneficiary of AI-enabled IT spending. With MSFT trading at a discounted level relative to its own multi-year trend, the case hinges on Azure’s growth trajectory and the company’s capital expenditure cadence, which the Q2 results showed advancing at a 66% year-over-year clip. If AI tools meaningfully lift enterprise productivity, Microsoft could sustain earnings momentum even as pricing models tighten in response to higher efficiency.
From a historical lens, Microsoft has often traded at a premium for cloud and AI exposure, but cyclical pullbacks in software stocks have created buy-the-dip opportunities when the moat remains intact. The Morgan Stanley view also notes that open-source AI and DIY development have mitigated existential pricing risk for incumbents, a perspective that matters as buyers weigh per-seat license economics against broader IT spend. Investors should monitor Azure growth signals, capex, and any pricing adjustments tied to AI adoption.
What to watch next: Azure and overall AI-driven demand will be the key catalysts; if Azure growth accelerates and capex stays elevated, MSFT could sustain multiple expansion. For Salesforce, the sentiment remains more cautious, but any improvement in product traction or monetization could narrow the recent gap.
Source: Original Article
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