HSBC on Thursday reiterated its Buy recommendation on Microsoft, with a price target raised from $413 to $516, estimating that the software giant's earnings per share (EPS) could double by 2027.

According to the broker, investors should consider Microsoft as a 'core investment' within the software sector given its solid growth, margin profile, market valuation and exposure to the cloud and AI.

Despite the company's size, HSBC anticipates average annual EPS growth of 17.8% excluding non-recurring items over the 2023/2027 period, i.e., a near doubling over the entire period.

Despite its growth prospects, HSBC concludes that Microsoft's share price is based on a 2024 PER of 30.8x, i.e., at a discount to the sector median of 35x.

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