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On Tuesday, Oracle Corporation (NYSE:ORCL) saw its price target adjusted by Piper Sandler, with analysts now aiming for a $190.00 target, down from the previous $210.00. Despite this reduction, the firm continues to recommend an Overweight rating on the stock. Currently trading at $141.04, Oracle’s stock has seen a -10.49% return year-to-date, though it maintains a strong 31.78% return over the past year. According to InvestingPro analysis, the stock appears fairly valued at current levels, with analyst targets ranging from $130 to $227.
Piper Sandler’s decision comes in the wake of Oracle’s reported increase in Remaining Performance Obligations (RPO) backlog, which showed a quarterly rise of $33 billion and a year-over-year surge of more than 60%. This significant growth indicates a robust and unrelenting demand for AI infrastructure. In addition, Oracle’s capital expenditure plans for the year have been revised upward to $16 billion, compared to the earlier projection of $14 billion. The company’s financial health remains strong, with InvestingPro data showing impressive revenue of $54.93 billion in the last twelve months and a robust gross profit margin of 71.26%.
Analysts at Piper Sandler acknowledged concerns about potential margin pressures due to the revenue mix shift toward Oracle Cloud Infrastructure (OCI). However, they believe that the company’s overall model is still well-positioned to maintain double-digit EPS growth. This optimism is supported by anticipated improvements in top-line growth and share buybacks, which could help counterbalance a slight decrease in operating margin (OM).
Looking ahead, the potential of Stargate, Oracle’s new initiative, is expected to contribute to the elevation of RPO by the end of Fiscal Year 2025. The adjusted price target reflects a more conservative estimated P/E ratio of 25 times for the Calendar Year 2026, a decrease from the previous 29 times. This change is based on the assumption that the growth in backlog will peak in Fiscal Year 2025 and begin to moderate into Fiscal Year 2026. With an EPS forecast of $6.30 for FY2025 and revenue growth forecast of 9%, Oracle continues to demonstrate strong fundamentals. For deeper insights into Oracle’s valuation and growth prospects, including 13 additional ProTips and comprehensive financial analysis, explore the full research report available on InvestingPro.
In summary, Piper Sandler’s revised price target for Oracle stock takes into account both the impressive backlog growth and the need for a more cautious valuation approach in the longer term. The firm maintains its positive stance on Oracle, reinforced by the tech giant’s strategic investments and the anticipated benefits of its Stargate program.
In other recent news, Oracle Corporation reported significant developments in its financial and strategic outlook. The company recorded a 63% year-over-year growth in Remaining Performance Obligations (RPO), reaching $130 billion, indicating a strong backlog of deals. However, Oracle’s third-quarter revenue growth of 8% fell short of expectations, attributed to timing fluctuations in AI consumption and capacity constraints. Analysts from UBS and RBC Capital adjusted their price targets for Oracle, with UBS lowering it to $200 and RBC Capital to $145, while maintaining a Buy and Sector Perform rating, respectively. BMO Capital also reduced its price target to $175, citing a positive long-term trajectory despite lower fiscal year 2026 estimates.
Oracle’s management has revised its fiscal year 2027 revenue growth targets to 20%, exceeding previous expectations, driven by strong demand for its cloud services. Analysts like TD Cowen remain optimistic, maintaining a Buy rating with a $210 price target, highlighting Oracle’s robust sales execution and customer commitment. Meanwhile, Oppenheimer maintained a Perform rating, noting Oracle’s significant growth in bookings and OCI, but also highlighting potential margin compression due to heavy investments in cloud infrastructure. As Oracle progresses towards its fiscal year 2026 and 2027 goals, investors and analysts will closely monitor the company’s ability to manage capacity constraints and integrate new contracts like Stargate.
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