Rothschild Redburn initiates Oracle stock with Sell rating, citing overvalued cloud revenue

Published 25/09/2025, 09:26
Rothschild Redburn initiates Oracle stock with Sell rating, citing overvalued cloud revenue

Investing.com - Rothschild Redburn initiated coverage on Oracle (NYSE:ORCL) with a Sell rating and a price target of $175.00 on Thursday. The rating comes as InvestingPro data shows Oracle trading at elevated multiples, with a P/E ratio of 70.8 and currently appearing overvalued based on its Fair Value metrics.

The research firm stated that the market "materially overestimates the value of Oracle’s contracted cloud revenues," suggesting investors are pricing in optimistic scenarios that may not materialize. This concern aligns with Oracle’s current market capitalization of $876.56 billion and revenue of $59.02 billion.

Rothschild Redburn characterized Oracle’s role in single-tenant, large-scale deployments as "closer to that of a financier than a cloud provider," with economics that differ significantly from what investors typically value in cloud companies.

The firm’s analysis indicates Oracle’s five-year Oracle Cloud Infrastructure (OCI) revenue guidance represents approximately $60 billion in value, suggesting the market is already pricing in what they describe as a "risky blue-sky scenario."

Rothschild Redburn also noted "subdued non-IaaS growth" as a concern, predicting market attention will eventually shift from headline figures toward underlying economics, creating "meaningful downside risk" for the stock.

In other recent news, Oracle Corporation’s credit ratings have been affirmed by major rating agencies as the company continues to expand its artificial intelligence infrastructure. S&P Global Ratings maintained Oracle’s ’BBB’ rating but noted a negative outlook due to concerns over increased debt levels and negative free cash flow. The company has raised its fiscal 2026 capital expenditure guidance to $35 billion, with expectations that spending could reach $38 billion in fiscal 2026 and possibly exceed $60 billion by fiscal 2028. Additionally, Oracle is reportedly planning a $15 billion bond offering, potentially including a rare 40-year bond, according to Bloomberg News.

Leadership changes have also been announced, with Clay Magouyrk and Mike Sicilia appointed as co-CEOs, while Safra Catz will transition to Executive Vice Chair of the board. Despite these changes, Oracle has reiterated its previous earnings guidance. Furthermore, Oracle and OpenAI are expected to expand their data center partnership in Abilene, Texas, with an announcement anticipated from OpenAI CEO Sam Altman and Oracle’s new co-CEO Clay Magouyrk. Analyst firms such as Citizens JMP and KeyBanc have reiterated positive outlooks for Oracle, maintaining Market Outperform and Overweight ratings, respectively, with price targets of $342 and $350.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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