TD Cowen increased its price target for Microsoft (NASDAQ:MSFT) to $425 from $390 per share in a note issued on Friday, with the analysts maintaining their Outperform rating on the stock.

In their preview of Microsoft's second-quarter performance, the analysts expressed expectations for strong results from Microsoft, particularly highlighting potential growth drivers in Azure. Microsoft is scheduled to report its results for the second quarter on January 30.

The analysts anticipate Azure's performance to exceed the high-end guidance, citing encouraging cloud data points, including third-party data and field checks that indicate stronger trends in new bookings and increasing tailwinds from AI. They expect Microsoft to continue its trend of surpassing expectations and raising forecasts, especially with more favorable foreign exchange conditions.

For the second half of 2024, the analysts see a promising setup for Microsoft, with expectations of firmer demand, a stable PC environment, emerging AI catalysts, and easing year-over-year comparisons.