On Tuesday, Bernstein maintained an Outperform rating on Oracle Corporation (NYSE:ORCL) and increased the price target to $213.00, up from the previous $213.00. The adjustment follows Oracle's quarterly performance and guidance, which were characterized as in-line to mixed.
Despite a roughly 8% drop in the stock in after-hours trading, the analyst emphasized that the fundamental narrative for Oracle remains intact. According to InvestingPro data, Oracle's stock has shown remarkable strength, delivering an 82.85% return year-to-date, though current valuations suggest the stock may be trading above its Fair Value.
The analyst highlighted several positive aspects of Oracle's performance, including an acceleration in the year-over-year growth of Oracle Cloud Infrastructure (OCI), which was seen as a key contributor to the company's success. With overall revenue growth of 6.4% and an impressive gross profit margin of 71.26%, the company continues to demonstrate strong operational efficiency.
Strategic back-office applications reported an 18% growth, while the database cloud services expanded by 28%, reaching a $2.2 billion run rate. Notably, more than $100 million of this revenue came from Oracle's collaborations with major cloud service providers, including Azure, Google (NASDAQ:GOOGL) Cloud Platform (GCP), and Amazon (NASDAQ:AMZN) Web Services (AWS).
In addition to the revenue growth, Oracle also reported better-than-expected margins. The analyst views the recent pullback in Oracle's stock price as an opportunity for investors to enter the market, particularly in light of the strong growth figures reported. The firm's increased confidence in Oracle's performance and market position is reflected in the revised price target.
The new price target of $213.00 is based on rolling forward estimates and applying a higher price to forward earnings (P/FE) multiple of 27 times. This represents an increase of one turn from the previous multiple used. The analyst's outlook suggests a belief in Oracle's continued growth and stability, despite the mixed reactions to the recent quarterly report.
InvestingPro analysis reveals that Oracle currently trades at a P/E ratio of 49.08, with the stock near its 52-week high of $198.31. Subscribers to InvestingPro can access 18 additional investment tips and a comprehensive Pro Research Report, offering deeper insights into Oracle's valuation and growth prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.