JF Ruie: Microsoft's valuation is more attractive compared to other large-scale cloud service companies, rating "buy".

Jefferies published a report stating that Microsoft's stock price has dropped by 18% since the first quarter, despite disclosing investments of $25 billion in OpenAI and $30 billion in Anthropic. Although its valuation multiple has compressed by 23%, as investors continue to shift towards semiconductor stocks. However, Microsoft's strong execution of large existing orders will significantly expand its capacity this year, with potential for upside. The report also notes that Microsoft's 2027 fiscal year earnings per share at a valuation of 23 times is attractive, lower than the 24 and 25 times of mega-scale cloud services companies Amazon and Google, respectively. Furthermore, Microsoft's visibility in operations, remaining performance obligations value, and AI monetization path are clearer compared to the latter two. Jefferies gave Microsoft a "buy" rating with a target price of $675.