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On Tuesday, UBS analyst Karl Keirstead adjusted the price target for Oracle Corporation (NYSE:ORCL) to $200.00, a decrease from the previous target of $210.00, while reaffirming a Buy rating on the company’s shares. With a current market capitalization of $406.85 billion and a P/E ratio of 36.37, InvestingPro analysis suggests the stock is currently fairly valued. Keirstead’s decision comes in the wake of Oracle’s third-quarter revenue growth of 8%, which did not meet the company’s guidance range of 9-11%. Despite this shortfall, the analyst remains optimistic about Oracle’s future, particularly noting the significant increase in the company’s deal backlog and the guidance for an acceleration in growth by fiscal year 2027 (FY27).
Oracle’s deal backlog has surged to $130 billion, marking a 63% year-over-year growth, which Keirstead highlights as a strong indicator of the company’s potential. This backlog is now 2.3 times the company’s revenue run-rate, a figure that notably surpasses Microsoft (NASDAQ:MSFT)’s 1.1 times. InvestingPro data shows Oracle maintains a strong financial health score of 2.52 (rated as GOOD), with particularly high marks in profitability metrics. However, the current reported performance obligation (cRPO) or short-term backlog growth was reported at 17%, consistent with the range of 15-20% seen over the last five quarters. This suggests that most of the backlog may not convert to revenue for several years.
The analyst also pointed out the company’s guidance for 15% revenue growth in FY26, which remains unchanged from previous estimates made in September. The noteworthy change is the newly issued guidance for 20% revenue growth in FY27, hinting at a significant year-two backlog conversion. Keirstead is slightly more conservative, projecting an 18% growth in FY27, primarily driven by Oracle’s cloud infrastructure (OCI) and Infrastructure as a Service (IaaS) segments. The anticipated growth in the Software (ETR:SOWGn) as a Service (SaaS) segment is more modest, expected to rise from the current 10% to 12-14% in FY26. It is also important to note that these projections do not include potential deals from Oracle’s Stargate project, which could provide additional positive outcomes.
In summary, while Oracle may have fallen short of its FY25 growth target and seen downward revisions in earnings per share (EPS) and free cash flow (FCF) for the same fiscal year, the company’s long-term growth prospects, particularly the notable backlog and the expected acceleration in FY27, provide a basis for Keirstead’s continued Buy rating on the stock.
In other recent news, Oracle Corporation’s earnings and revenue results have been a focal point for investors. The company reported a mixed performance in its recent earnings release, missing top-line revenue expectations, which has raised concerns about potential slowing growth outside of Oracle Cloud Infrastructure (OCI). Despite these challenges, Oracle’s management remains optimistic, projecting a 15% revenue increase for the upcoming fiscal year, supported by plans to double data center capacity and contributions from new Stargate contracts. Analyst firms have adjusted their price targets in light of these developments, with RBC Capital lowering Oracle’s target to $145, citing ongoing capacity constraints that impacted revenue.
BMO Capital Markets also reduced its price target to $175 from $205 while maintaining a Market Perform rating, highlighting a positive long-term trajectory despite revised fiscal year 2026 estimates. Similarly, BofA Securities decreased its price target to $175, pointing to uncertainties in cloud growth and margin pressures. Oppenheimer maintained a Perform rating, noting significant growth in bookings and a positive outlook for fiscal years 2026 and 2027, despite the anticipated compression in operating margins due to investments in OCI growth.
DA Davidson reiterated a neutral rating with a $150 target, emphasizing Oracle’s stable outlook and management’s confidence in achieving robust revenue growth through strategic initiatives. These recent developments reflect the challenges and opportunities Oracle faces as it navigates capacity constraints and aims for ambitious growth targets.
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