MW Why one analyst believes Microsoft's stock may be bottoming out
By Hannah Pedone
Bernstein's Mark Moerdler sees a good entry point for new investors in the stock, as Microsoft should start reaping the benefits of capex
Shares of Microsoft were up more than 10% from their March low on Tuesday.
Investors have been waiting for Microsoft's enormous capital expenditures to turn into growth, and some analysts are saying that moment may be arriving soon.
The software giant's stock has had a rough several months, as investors were skeptical that the massive capital expenditures on data centers and servers to build out its artificial-intelligence capabilities would actually translate into revenue growth. Worries that AI would replace the need for many software functions have also weighed heavily on the stock, and the broader software sector.
From its Oct. 28 record close of $542.07, Microsoft's stock $(MSFT)$ had tumbled 34.2% by March 27 to a one-year low of $356.77.
Since then, the stock has shown some signs of life. It rose 2.3% on Tuesday, after gaining 3.6% on Monday. And since March 27, it has rallied 10.2%, which is enough for many on Wall Street to say the stock is now in a correction of the bear-market selloff.
Bernstein analyst Mark Moerdler told MarketWatch that given the uncertainty over whether when AI spending will translate into actual revenue, the stock might appear to be "bouncing along a bottom." But despite that uncertainty, Moerdler believes current prices represent a good entry point for new investors in the stock.
He wrote in a recent note to clients that there are a number of justifiable reasons why capex hasn't shown up in growth of Azure, the company's cloud-computing platform. He said Microsoft is likely allocating computing toward training its own models and putting capacity toward first-party apps like Office and Copilot.
That said, he believes that Azure's revenue growth will accelerate in the next two quarters. That's because it takes roughly six months for Microsoft to go from "buying hardware components to generating revenue" from servers, he said.
"Two quarters ago the shift started, and we believe that shortly Microsoft will reap the benefits," he added.
Read more: Microsoft is sitting on a 'treasure chest' that could help lift the stock 20%
The software sector has also seen some life in the past couple of sessions. The iShares Expanded Tech-Software Sector ETF IGV, of which Microsoft is the second-largest holding, gained 1% on Tuesday, after surging 5.4% on Monday.
But unlike Microsoft, which appeared to bottom nearly three weeks ago, the ETF hit its recent bottom just three sessions ago, when it closed Friday at the lowest price since November 2023.
Piper Sandler analyst Billy Fitzsimmons wrote in a note last week that while he acknowledges concerns over capex spending, he also believes Microsoft is one of the most defensible software companies, despite all the pessimism in the industry.
That's because of the company's ability to directly monetize the AI boom given ample demand for its Azure cloud infrastructure.
So far this year, Microsoft shares have shed 18.7%, while the iShares software ETF has slid 24.8%. Oracle's stock $(ORCL)$, which is the ETF's largest holding, has climbed 18% the past two sessions, but is still down 16.4% this year.
-Hannah Pedone
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(END) Dow Jones Newswires
April 14, 2026 18:05 ET (22:05 GMT)
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