Oracle Corporation (NYSE: NYSE:ORCL) has received a reiterated Hold rating from CFRA, with a steady price target of $150.00.
The firm's valuation is based on a price-to-earnings (P/E) ratio of 22 times their calendar year 2025 earnings per share (EPS) estimate of $6.80, which is above Oracle's historical average but below that of its peers.
CFRA has kept its fiscal year 2025 (ending in May) EPS estimate at $6.29 and fiscal year 2026 estimate at $7.08.
Oracle recently reported earnings per share (EPS) of $1.39 for the August quarter, surpassing the consensus estimate of $1.33 and the previous year's $1.19 figure.
The company's sales increased by 6.9%, driven by a 10% growth in cloud services and license support, while declines in hardware and services partially offset these gains.
The company's cloud revenue showed a robust growth of 21%, with Infrastructure-as-a-Service (IaaS) up by 45%, an increase from 42% in the May quarter. Cloud software as a service (SaaS) also grew by 10%. IaaS, now accounting for 17% of Oracle's sales, is highlighted as a key growth driver and is expected to more than double in the next two years.
The growth is anticipated to accelerate through fiscal year 2025, bolstered by Oracle's cloud expansion plans.
Following a MultiCloud agreement with Amazon (NASDAQ:AMZN) Web Services (AWS), Oracle is poised to experience additional growth from partnerships established with the three largest cloud providers over the past year.
The company's remaining performance obligations (RPO) surged 53% to $99 billion, which provides visibility into the company's revenue prospects into fiscal year 2026.
However, Oracle's aggressive capital expenditure, which is projected to double in fiscal year 2025, along with a net debt of $74 billion, is expected to constrain free cash flow (FCF) growth, which is forecasted to decline in fiscal year 2025 compared to fiscal year 2024.
Meanwhile. TD Cowen has recently reaffirmed its positive stance on Oracle, raising the stock's price target to $180 from $165, while maintaining a Buy rating.
This comes after Oracle's third consecutive quarter of significant Recurring Profit Obligation (RPO) growth acceleration and management's guidance for over 10% revenue growth and more than 50% Oracle Cloud Infrastructure (OCI) growth in fiscal year 2025.
Similarly, BMO Capital has adjusted Oracle's price target to $173 from $160, maintaining a Market Perform rating. This adjustment followed Oracle's strong quarterly results, which included a 52% year-over-year growth in RPO and an 18% growth in Current Remaining Performance Obligations (CRPO).
Additionally, Piper Sandler has expressed confidence in Oracle's sustained growth trajectory, raising its price target from $150.00 to $175.00, and retaining an Overweight rating on the stock.
These developments come in light of Oracle's Q1 Fiscal Year 2025 Earnings Call, which reported an 8% year-over-year increase in total revenue to $13.3 billion. The company's cloud revenue rose by 22% to $5.6 billion, with Infrastructure as a Service (IaaS) revenue experiencing a notable surge of 46%.
Oracle's operating income also grew by 14%, maintaining a steady 43% operating margin. Looking ahead, Oracle projects total revenue growth of 7% to 9% and cloud revenue to rise by 23% to 25% in the upcoming Q2.
InvestingPro Insights
Oracle Corporation's (NYSE:ORCL) financial metrics and market performance provide valuable insights for investors. According to real-time data from InvestingPro, Oracle has a market capitalization of $385.52 billion, reflecting its significant presence in the software industry. The company's P/E ratio stands at 36.05, indicating a higher valuation compared to the industry average. This aligns with one of the InvestingPro Tips that Oracle is trading at a high earnings multiple, which suggests investors are willing to pay a premium for its shares, possibly due to its strong position and growth potential in cloud services.
With a revenue growth of 6.02% in the last twelve months as of Q4 2024, Oracle is showing a steady increase in sales, which may reassure investors of its growth trajectory. The company's gross profit margin of 71.41% is particularly notable, as it demonstrates the efficiency of Oracle's operations and its ability to maintain profitability. Furthermore, the InvestingPro Tips highlight that Oracle has maintained dividend payments for 16 consecutive years, which could be a sign of its commitment to providing shareholder value, despite a high level of net debt impacting free cash flow projections.
For those interested in delving deeper into Oracle's financial health and future prospects, additional InvestingPro Tips are available, including insights on the company's short-term obligations, EBITDA valuation, and analysts' profitability predictions for the year. With a total of 15 additional tips listed on InvestingPro, investors can gain a comprehensive understanding of Oracle's financial position and make informed decisions.
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