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On Tuesday, Stifel analysts lowered the price target for Oracle (NYSE:ORCL) shares to $150 from the previous target of $175, while maintaining a Hold rating on the stock. The revision follows Oracle’s revenue performance, which fell short of the company’s constant currency projections, with an 8% increase versus the guided range of 9-11%. According to InvestingPro data, Oracle’s current trading price of $140.31 reflects a P/E ratio of 33.5x, suggesting a premium valuation relative to near-term earnings growth expectations. Despite this, Oracle reported a significant year-over-year constant currency (Y/Y-CC) increase of 63% in Remaining Performance Obligations (RPO) and a quarter-over-quarter (Q/Q) growth of $33 billion, attributed to robust demand for its cloud services.
Oracle’s management emphasized that the impressive RPO growth did not factor in any contributions from Stargate, a detail that underscores the organic strength of the company’s cloud business. Looking ahead, management has provided revenue growth guidance of approximately 15% for fiscal year 2026, aligning with the $66 billion revenue target set during the 2024 Analyst Day. Furthermore, they forecast an approximate 20% revenue growth for fiscal year 2027.
Stifel has updated its financial model to better reflect Oracle’s top-line guidance. However, adjustments were made to account for lower operating margins resulting from decreased gross margins due to increased depreciation and AI-related expenses. Analysts from Stifel are confident that Oracle can sustain solid revenue growth, driven by the conversion of AI infrastructure bookings into training revenue and the scaling of partnerships with hyperscale database providers in the medium term.
The decision to lower the price target to $150 is influenced by the recent compression of group multiples and the belief that there is limited potential for significant multiple expansion from current levels. Oracle’s consistent focus on cloud services and AI infrastructure is expected to maintain its revenue growth trajectory, although the reduced price target reflects a more conservative valuation amid market conditions. InvestingPro subscribers have access to 13 additional key insights about Oracle’s valuation and growth prospects, along with comprehensive financial health metrics that show an overall "GOOD" rating for the company.
In other recent news, Oracle Corporation’s earnings and revenue results have prompted several analysts to adjust their outlooks. Oracle reported an 8% third-quarter revenue growth, which fell short of expectations, leading UBS to cut its price target from $210 to $200 while maintaining a Buy rating. RBC Capital also reduced its price target to $145, citing capacity constraints that affected Oracle’s performance, but noted the company’s 63% growth in Remaining Performance Obligations (RPO). Meanwhile, BMO Capital lowered its price target to $175 from $205, maintaining a Market Perform rating, and highlighted Oracle’s longer-term trajectory despite near-term adjustments.
Additionally, Piper Sandler adjusted Oracle’s price target to $190 from $210, maintaining an Overweight rating, and acknowledged a robust demand for AI infrastructure, evidenced by a $33 billion increase in Oracle’s RPO backlog. TD Cowen, on the other hand, maintained a Buy rating and a $210 target, noting Oracle’s strong sales execution and the potential impact of its Stargate contracts. Analysts have expressed varying degrees of optimism about Oracle’s future growth, with fiscal year 2027 revenue projections adjusted upwards by some firms, reflecting confidence in the company’s strategic investments and backlog conversion potential.
Overall, Oracle’s recent financial performance and strategic initiatives have led to mixed analyst reactions, with some firms emphasizing challenges such as capacity constraints while others focus on the company’s strong demand environment and future growth prospects.
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