On Monday, Deutsche Bank (ETR:DBKGn) maintained its Buy rating on Oracle Corporation (NYSE: NYSE:ORCL) stock and increased the shares target to $165, up from the previous target of $150. The revision reflects the firm's updated financial model which now includes Oracle's fourth-quarter results and guidance.
The updated model by Deutsche Bank adjusts Oracle's revenue estimates for fiscal years 2025 and 2026 to $57.7 billion and $64.5 billion, respectively. Additionally, the non-GAAP earnings per share (EPS) estimates for the same years have been revised to $6.16 and $7.00.
This new price target is derived from a discounted cash flow (DCF) analysis, which is based on a weighted average cost of capital (WACC) of 8%, a terminal risk-free rate of 4%, and an equity risk premium of 5%. Deutsche Bank uses a terminal growth rate of 3% for the DCF, aligning with its view of GDP growth.
The analyst also noted potential downside risks to Oracle's rating and target price. These include key personnel risks, changes in the competitive environment, fluctuations in IT spending, and challenges related to the integration of Cerner (NASDAQ:CERN), a recent acquisition by Oracle.
InvestingPro Insights
Oracle Corporation (NYSE: ORCL) has been the subject of positive revisions, with Deutsche Bank maintaining a Buy rating and raising the price target to $165. In light of these developments, InvestingPro data and tips offer further insights into Oracle's performance and valuation. The company's market capitalization stands at a robust $379.65 billion, reflecting its significant presence in the industry. With a P/E ratio of 36.27 and adjusted P/E for the last twelve months as of Q4 2024 at 34.18, Oracle trades at a high earnings multiple, which may suggest confidence in its future profitability despite a P/E ratio that is high relative to near-term earnings growth (PEG Ratio of 1.74).
Oracle's consistent dividend policy is highlighted by an InvestingPro Tip, noting that it has raised its dividend for 10 consecutive years and maintained payments for 16 consecutive years. This could be an attractive point for income-focused investors. Additionally, the company's strong recent performance is underlined by a significant return over the last week, with a 1 Week Price Total Return of 10.95% and trading near its 52-week high at 97% of the peak price. Analysts also have revised their earnings upwards for the upcoming period, which could indicate potential for continued growth.
For readers looking to delve deeper into Oracle's financial health and future outlook, InvestingPro provides a comprehensive array of additional tips. There are currently 18 more InvestingPro Tips available for Oracle, which can be accessed by visiting: https://www.investing.com/pro/ORCL. To get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, readers can use the coupon code PRONEWS24.
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