Microsoft (MSFT) stock hit a buy point on Friday after the company announced that it is adding artificial intelligence tools to its popular Office productivity applications.
XThe Redmond, Wash.-based software giant on Thursday introduced Microsoft 365 Copilot. Microsoft is embedding Copilot functions into apps that many workers use daily, 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 select commercial customers. But Microsoft did not detail how it intends to monetize Copilot.
Microsoft also announced Business Chat. The new experience works across Office apps and a customer's calendar, emails, chats, documents, meetings and contacts to do things that people weren't able to do before.
For instance, 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 grounding 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 news 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."
On the stock market today, Microsoft stock advanced 1.2% to close at 279.43. With the move, Microsoft stock broke out of a flat base at a buy point of 276.86, according to IBD MarketSmith charts.
Copilot Called Big Productivity 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 stock and upped his price target to 315 from 300.
"Microsoft 365 Copilot will be a large productivity enhancer 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 presentation," "analyze sales data" and "prioritize my email inbox."
Will Be Difficult For Rivals To Match
Microsoft 365 Copilot will be very difficult for rivals to emulate, Oppenheimer analyst Timothy Horan said in a note to clients. For one, Microsoft has an enormous base of 1.5 billion users. It also has access to OpenAI technology.
Further, he noted that Alphabet (GOOGL) unit Google and Salesforce (CRM) had "me-too" announcements timed with Microsoft's presentation.
Deutsche Bank analyst Brad Zelnick kept his buy rating on Microsoft stock 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 has long been a major tenet 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 stock 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 demonstrating its usefulness in practice.
"The apparent productivity gains from the technology — which can create presentations, filter and summarize emails, draft Word docs, create Excel templates and much more — looked to be material and the demo likely impressed even the biggest of skeptics," Keirstead said in a note to clients.
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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