On Tuesday, KeyBanc Capital Markets maintained its Overweight rating on shares of Oracle Corporation (NYSE:ORCL) and increased the price target to $175 from $165.
The adjustment follows Oracle's recent performance, where a significant build in Remaining Performance Obligations (RPO) overshadowed less impressive headline figures. The firm highlighted that the total RPO grew by 52.5% year-over-year, surpassing the consensus estimate by nearly 10%.
The growth in RPO is particularly noteworthy as it comes against the backdrop of what was considered the easiest comparison from the fiscal year 2024.
Although there was a notable deceleration on a two-year stack basis, the robust RPO growth is viewed as sufficient to alleviate concerns arising from the Oracle Cloud Infrastructure (OCI) recognized revenue, which did not demonstrate significant upside this quarter.
KeyBanc expressed some curiosity regarding Oracle's capital expenditures, noting that their unexpectedly low level drew attention. Despite this, the firm's overall stance on Oracle remains positive. The sustained momentum observed in the cloud sector's numbers is expected to be a driving force behind the stock's future performance.
The report emphasizes that while Oracle's headline results may not have been characterized as weak this quarter, the focus has shifted to other indicators of cloud momentum, such as RPO growth. This metric is seen as an important sign of Oracle's continued progress in the cloud market, which KeyBanc believes will eventually be reflected in other financial figures. As a result, the firm has confidently raised its price target for Oracle's shares.
In other recent news, Oracle Corporation has unveiled several advancements in its services and reported robust financial growth. The company has launched the Oracle Cloud Infrastructure (OCI) Generative AI (GenAI) Agents service, which includes retrieval-augmented generation (RAG) capabilities.
This service aims to streamline the application of AI in business processes. Oracle also announced the introduction of a new AI-centric application development infrastructure, termed generative development (GenDev), and new AI capabilities within its Oracle Fusion Data Intelligence suite.
Oracle reported an 8% increase in total revenue to $13.3 billion, with a significant rise in cloud revenue of 22% to $5.6 billion, and Infrastructure as a Service (IaaS) revenue surging by 46%. Analyst firms CFRA, TD Cowen, and BMO Capital have responded to these developments by maintaining or adjusting their price targets for Oracle.
The company also announced the beta release of Oracle Code Assist, an AI tool aimed at boosting developer productivity, and plans to enhance its Oracle Data Intelligence Platform with the addition of Oracle Intelligent Data Lake by 2025. Oracle has integrated Oracle Cloud Infrastructure Zero Trust Packet Routing into its cloud network for enhanced security. These are recent developments at Oracle Corporation.
InvestingPro Insights
KeyBanc Capital Markets' recent price target increase for Oracle Corporation reflects optimism about the company's future, particularly in the cloud sector. In support of this perspective, InvestingPro offers valuable insights that can further inform investors about Oracle's financial health and market position.
According to InvestingPro Data, Oracle has a market capitalization of $426.36 billion, demonstrating its substantial presence in the industry. Its P/E ratio stands at 36.05, which indicates that investors are willing to pay a premium for Oracle's earnings. This is further supported by a solid revenue growth of 6.02% over the last twelve months as of Q1 2023, showcasing the company's ability to increase its sales figures.
InvestingPro Tips highlight that Oracle has raised its dividend for 10 consecutive years, signaling confidence in its financial stability and commitment to returning value to shareholders. Additionally, the company is a prominent player in the Software industry, which aligns with KeyBanc's positive outlook on Oracle's cloud sector momentum.
For investors seeking more detailed analysis and additional insights, InvestingPro provides further tips on Oracle's financial metrics and industry performance. There are 14 more InvestingPro Tips available that delve into aspects such as Oracle's profitability, valuation multiples, and analysts' predictions for the company's profitability this year.
These insights from InvestingPro reinforce the view that Oracle is a strong contender in its field, with a robust financial foundation and promising growth prospects in the cloud market.
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