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On Friday, TD Cowen analysts reiterated a Buy rating on Oracle Corporation (NYSE:ORCL) with a steady price target of $210.00. The endorsement follows Oracle’s robust third-quarter bookings, which indicate a potential significant growth acceleration in the coming quarters. Currently trading at $150.18, Oracle’s stock commands a P/E ratio of 34.2x, reflecting high growth expectations. According to the analysts, Oracle has established a leading position in AI training, and as the company’s capacity expands, they anticipate growth rates to double within the next year. InvestingPro data shows Oracle as a prominent player in the software industry, with analyst targets ranging from $130 to $246.
The analysts highlighted Oracle’s bookings and pipelines, which are increasing at a faster pace than revenues. This trend is evident in Oracle’s updated guidance, which projects total growth acceleration from approximately 9% in FY25 to about 15% in FY26 and roughly 20% in FY27. According to InvestingPro, Oracle’s current revenue growth stands at 6.23% over the last twelve months, with the company generating $55.78 billion in revenue. The company’s year two and three Remaining Performance Obligations (RPO), as disclosed in its 10Q filings, have surged from approximately 9% constant currency in the second quarter of FY24 to around 87% constant currency in the third quarter of FY25, now valued at approximately $52 billion.
The majority of this RPO growth is attributed to AI, and the analysts expect that as data centers become operational, they will release a substantial influx of revenues into Oracle’s profit and loss statement. Additionally, Oracle’s backlog and new midterm targets do not yet account for Stargate, which TD Cowen believes will serve as another upcoming catalyst. The analysts see Oracle as well-positioned to benefit from investments by leading foundation model entities such as OpenAI, META (NASDAQ:META), and others.
With growth anticipated to significantly rise over the next 12 months and beyond, TD Cowen foresees a clear trajectory for Oracle’s valuations to re-rate higher compared to its current approximately 20x CY26E price-to-earnings ratio. Oracle’s strong position in AI and the expected operationalization of its data centers are poised to be key drivers of this growth and revaluation. InvestingPro analysis indicates Oracle maintains a "GOOD" overall financial health score, though the stock appears overvalued at current levels. For deeper insights into Oracle’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 13 additional ProTips and extensive financial metrics.
In other recent news, Oracle has reported a mixed performance for its fiscal third quarter, falling short of revenue expectations while meeting adjusted earnings per share forecasts. The company’s revenue shortfall was primarily attributed to slower-than-anticipated growth in its Oracle Cloud Infrastructure (OCI) and challenges in its Software (ETR:SOWGn) as a Service (SaaS) segment. Despite these setbacks, Oracle’s Remaining Performance Obligations (RPO) showed robust growth, increasing 63% year-over-year on a constant currency basis, indicating strong future revenue potential. Analysts from Citi, Bernstein, and Cantor Fitzgerald have responded by adjusting their price targets for Oracle, with Citi lowering it to $160, Bernstein to $207, and Cantor Fitzgerald to $175, each maintaining varied ratings from Neutral to Overweight.
Oracle’s management has expressed confidence in overcoming current supply constraints and has raised its revenue guidance for fiscal year 2027 to exceed 20%, driven by growth in OCI and artificial intelligence integration. The company has also raised its dividend by 25%, reflecting confidence in its cash generation capabilities. Additionally, Oracle has emerged as a key player in a potential deal to assist in running TikTok operations, as part of a multi-billion dollar initiative with ByteDance known as Project Texas. This project involves storing U.S. user data on Oracle servers and reviewing TikTok’s algorithm source codes, a move that has garnered support from President Trump.
Overall, Oracle’s future growth trajectory appears promising, with analysts noting the potential for accelerated growth in the cloud sector, despite recent revenue challenges and adjustments in price targets.
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