On Wednesday, Evercore ISI increased its share price target for Oracle Corporation (NYSE:ORCL) to $160 from the previous $145, while maintaining an Outperform rating on the stock.
The firm's decision follows Oracle's fourth-quarter results, which showed revenues of $14.3 billion, slightly below the consensus estimate of $14.5 billion, and earnings per share (EPS) of $1.63, just under the expected $1.65.
The slight miss in headline figures is attributed to various factors including currency exchange headwinds, the closure of the marketing business, a transition from licensing to cloud, and a higher tax rate. Despite these challenges, Oracle's stock is trending upwards due to its strengthening position in the public cloud market.
This is highlighted by a 44% growth in Remaining Performance Obligations (RPO) and the same percentage increase in Generation 2 Oracle Cloud Infrastructure (OCI), even against a challenging comparison from the previous year.
Oracle's cloud momentum is anticipated to fuel approximately 10% total revenue growth in fiscal year 2025. The recent announcement that OpenAI will utilize OCI has further bolstered Oracle's reputation as an AI platform. Additionally, Oracle's new partnership with Google (NASDAQ:GOOGL) is expected to expand distribution for its database, with speculation that Amazon (NASDAQ:AMZN) Web Services (AWS) may follow suit.
Evercore ISI remains optimistic about Oracle's prospects, citing several reasons for its positive outlook. The analyst expects revenue growth to accelerate throughout fiscal year 2025 and believes that the upcoming Financial Analyst Meeting (FAM) in September might reveal an upward revision to Oracle's fiscal year 2026 guidance.
The burgeoning AI partnership with OpenAI is just beginning, and with Oracle's shares trading at 18.9 times the projected earnings for calendar year 2025, the firm views the risk/reward balance as attractive given the company's cloud momentum. The new price target of $160 reflects a multiple of 24.1 times the expected earnings for calendar year 2025.
In other recent news, Oracle Corporation saw a significant 20% increase in cloud revenue, reaching $5.3 billion in the fourth quarter. However, the total revenue of $14.29 billion fell short of analysts' expectations.
Deutsche Bank (ETR:DBKGn) maintained a Buy rating on Oracle with a steady price target of $150, while DA Davidson kept a neutral stance with a price target of $105. Barclays (LON:BARC) and Evercore ISI also maintained their Overweight and Outperform ratings respectively.
Oracle has been making strides in strategic collaborations, notably with OpenAI and Google Cloud, aiming to expand its cloud infrastructure services. The partnership with Google Cloud is set to integrate the full Oracle Database stack into Google Cloud Platform data centers, enhancing Oracle's ability to meet customer needs. Furthermore, Oracle is planning a potential collaboration with Elon Musk's xAI to construct a supercomputer by fall 2025.
These recent developments underscore Oracle's continuous efforts to innovate and expand in the AI and cloud services sector, with an emphasis on meeting the rising demand for AI training compute capacity on its Cloud Infrastructure.
Analysts suggest that these advancements could significantly aid Oracle in transitioning its $14 billion on-premises infrastructure support base to the cloud, potentially leading to a substantial increase in revenue.
InvestingPro Insights
Oracle Corporation (NYSE:ORCL) has been a subject of investor interest following its recent financial performance and strategic partnerships. With the stock's positive trajectory, insights from InvestingPro can provide additional context for investors. Oracle's commitment to shareholder returns is evidenced by its decade-long streak of raising dividends, now at 10 consecutive years, which aligns with its 16-year history of maintaining dividend payments. This reflects a stable financial approach and a shareholder-friendly policy.
On the valuation front, Oracle is trading at a high P/E ratio of 31.89, suggesting that investors are willing to pay a premium for its earnings relative to near-term growth expectations. Additionally, the company's stock typically exhibits low price volatility, which may appeal to investors looking for stable returns. Nevertheless, Oracle's short-term obligations exceeding its liquid assets indicate a need for careful financial management in the near term. With a market capitalization of $340.49 billion and a robust gross profit margin of 71.53% in the last twelve months as of Q3 2024, Oracle's financial health appears strong.
For those seeking to delve deeper into Oracle's financial metrics and strategic positioning, InvestingPro offers additional insights. The platform provides several more InvestingPro Tips for Oracle, which can be accessed at InvestingPro's dedicated ORCL page. To enhance your investment analysis, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.