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On Thursday, TD Cowen reaffirmed a Buy rating and a $210.00 price target on Oracle (NYSE:ORCL) shares, representing a significant upside from the current price of $138.04. The $389.45 billion market cap company, which according to InvestingPro data maintains a "FAIR" overall financial health score, received this endorsement following a recent visit by analysts to Oracle’s data center and an in-depth briefing on the company’s cloud infrastructure and artificial intelligence (AI) strategy in the Salt Lake City area. Oracle’s management highlighted the robust demand for AI, which continues to exceed supply, and noted the company’s plans to expand its GPU cluster capabilities from 65,000 to 131,000 by 2025.
The company’s infrastructure is designed to seamlessly transition between AI training and inference workloads, reflecting flexibility and efficiency in operations. According to the analysts, Oracle Cloud Infrastructure (OCI) is experiencing a period of ultra growth. In the third quarter, OCI boasted annualized revenues of $10.6 billion, with year-over-year growth in OCI consumption at 57% and Cloud Remaining Performance Obligations (RPO) growing over 90% year-over-year. This impressive growth contributes to Oracle’s overall revenue of $55.78 billion in the last twelve months, with a robust gross profit margin of 71.12%.
The growth in backlog, outpacing consumption, is seen as a positive indicator for future growth in OCI services. Over the past year, the number of OCI customer-facing regions has surged from 69 to 101, a 46% increase. Oracle now has a total of 176 live and planned regions, positioning it favorably against competitors such as AWS, which has 36 regions, and Azure, with over 60.
TD Cowen emphasized Oracle’s unique position in the market, owing to its small footprint capabilities and Dedicated Cloud offerings, which allow it to cater to different market demands in comparison to other leading hyperscalers. Oracle’s continued expansion and strategic focus on AI and cloud infrastructure demonstrate the company’s commitment to growth in these key technological areas. Based on InvestingPro analysis, Oracle is currently trading near its Fair Value, with analyst targets ranging from $135 to $246. For deeper insights into Oracle’s valuation and growth prospects, including 12+ additional ProTips and comprehensive financial metrics, explore the full Pro Research Report available on InvestingPro.
In other recent news, Oracle Corporation has reported a second cybersecurity breach within a month, leading to the theft of old client log-in credentials. The incident has triggered an investigation by the FBI and cybersecurity firm CrowdStrike Holdings (NASDAQ:CRWD) Inc. Meanwhile, Oracle’s cloud infrastructure business continues to draw positive attention from analysts. Piper Sandler reaffirmed its Overweight rating with a $190 price target, citing Oracle’s significant investment in AI data centers and cloud growth. KeyBanc also maintained its Overweight rating with a $200 target, highlighting Oracle’s adaptability and strategic focus on AI at the hyperscale level. Bernstein reiterated an Outperform rating with a $207 target, emphasizing Oracle’s growth potential in non-AI cloud services and ERP expansion. Guggenheim expressed strong confidence with a Buy rating and a $220 target, noting Oracle’s competitive edge in AI training workloads. Despite the cybersecurity challenges, Oracle’s strategic developments in AI and cloud services continue to bolster investor confidence.
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