Microsoft (NASDAQ: MSFT) continues to trade on a tear, though shares dipped slightly this week as the world’s largest company hit 52-week highs. Yet, according to analysts, there should be even more room to run.
That might be true, but the stock continues to be incredibly expensive and volatile. So, let’s look at why you might want to buy or avoid this stock and perhaps another tech stock to consider.
Revenue rising
The biggest bullish bet for Microsoft stock comes from the company’s ability to continue its incredible revenue growth. Yet analysts believe that growth should continue, especially after company comments on its cloud business.
Microsoft stock reported its capital expenditure forecast for the future, with spending to “increase materially on a sequential basis.” This comes after more investments into both cloud and artificial intelligence (AI) infrastructure.
What this points to is the company is likely to see a large increase in cloud revenue in the future. Furthermore, even though Microsoft stock continues to be the one to beat for AI, there is reason to believe it could scale out at an incredible level.
Guidance up, shares down
Yet after hitting those 52-week highs, shares of Microsoft stock are down, trading at about US$404 as of writing. This could mean a huge opportunity for shareholders in the future, with the consensus target price now at US$451, as of writing.
Analysts have been increasing the guidance on the heels of even more product innovation and learning from their clients to drive even more innovation in the future. And AI should continue to be a large part of this process. AI alone contributed to a six-point increase in cloud growth in the latest quarter.
This means AI is becoming the core product for Microsoft stock. Yet if you want in on AI, there are other companies working with Microsoft stock on this AI future, including a Canadian tech stock you’ll want to consider.
OpenText stock
One company investors will want to consider is OpenText (TSX: OTEX), a company that also deals in cloud data and AI. During its recent earnings report, the company achieved record revenue results yet saw shares drop as it narrowed its earnings before interest, taxes, depreciation, and amortization.
However, in an interview with the Motley Fool, Chief Financial Officer Mandhu Ranganathan stated that this is to help the company invest more in AI. And a recent divestment of part of its Micro Focus acquisition will certainly help with that.
In fact, the company announced last year it will be rolling out seven new AI vectors. Each will help a different part of the company’s productivity and optimization. And given that the company is a partner with Microsoft stock, if OpenText stock does well, so too will Microsoft stock, and vice versa.
Bottom line
AI is the future, and there are many companies around the world getting into it. But if you want the best of the best for revenue growth and more cloud usage, then I would consider Microsoft stock and OpenText stock.
However, if you’re only going to choose one, OpenText stock offers far more value than Microsoft stock at this point. Despite dropping in share price, that’s likely to turn around as the company grows cloud bookings and integrates more AI. And with more cash coming their way, buybacks have also been noted as part of the future. So, certainly consider this stock if you’re also looking at Microsoft stock today.
