On Wednesday, Barclays (LON:BARC) maintained its Overweight rating on Oracle Corporation (NYSE:ORCL) stock, increasing the price target to $160 from $147. The adjustment follows Oracle's reported robust growth in remaining performance obligations (RPO) and a raised capital expenditure (capex) guidance, signaling continued business momentum.
According to the firm, while the fourth quarter did not showcase exceptional performance due to the need for capacity ramp-up, the forecast for fiscal year 2025 indicates a promising trajectory.
Oracle's guidance suggests a start with single-digit revenue growth rates, progressing to double-digit exit growth rates by the year's end. This outlook reflects the company's improving growth momentum.
Barclays highlighted that despite Oracle not operating in isolation—as evidenced by weaker Software as a Service (SaaS) revenue this quarter—the company's substantial artificial intelligence (AI) contracts have contributed to strong bookings. These contracts are expected to compensate for any shortcomings in other areas.
The firm's analysis suggests that Oracle could emerge as another key player in the AI sector. It notes that many investors may not have fully recognized the company's potential in this space.
With the anticipated share growth and the raised price target to $160, Barclays' stance on Oracle remains positive, based on higher estimates and an increased earnings multiple.
In other recent news, Oracle Corporation has been making strides in the cloud services sector. BofA Securities has raised its price target for Oracle from $144 to $155, acknowledging the company's robust performance in the fourth quarter, particularly in its cloud business.
Oracle's cloud strength was a highlight of its financial results, with a significant $18 billion increase in backlog and remaining performance obligations (RPO), primarily due to multi-year hosting deals.
However, the company's cloud subscription growth was slightly below expectations, and the growth rate of its Software as a Service (SaaS) segment was modest compared to other application peers. This indicates that Oracle may be losing market share in this area.
In terms of earnings, Oracle reported a strong Q4 performance in the fiscal year 2024, largely driven by the increasing demand for its cloud services. The company's cloud revenue, including Software as a Service (SaaS) and Infrastructure as a Service (IaaS), increased by 23% to $4.7 billion. Oracle's Remaining Performance Obligations (RPO) also saw a notable increase of 44% to $98 billion.
Oracle's recent partnership with Google (NASDAQ:GOOGL) and plans to construct large data centers for AI development further underscore the company's successful pivot towards cloud-based services.
The company expects total revenue to grow 6-8% in constant currency and 5-7% in USD in Q1 of the fiscal year 2025, with cloud revenue growth forecasted at 21-23% in constant currency and 20-22% in USD. These developments suggest a strong outlook for Oracle's continued revenue growth.
InvestingPro Insights
Oracle Corporation (NYSE:ORCL) has demonstrated a commitment to shareholder returns, having raised its dividend for 16 consecutive years, a testament to its financial stability. This dedication to consistent dividend payments is coupled with a solid market capitalization of $340.49 billion, reinforcing Oracle's position as a prominent player in the software industry. While the company is trading at high valuation multiples, with a P/E ratio of 31.89 and a Price/Book multiple of 60.55, these metrics are indicative of investor confidence in Oracle's future earnings potential and asset value.
Investors looking to delve deeper into Oracle's financials will find valuable insights with InvestingPro. For instance, Oracle's revenue growth over the last twelve months as of Q3 2024 stands at 9.49%, underlining the company's ability to expand its top line. Additionally, the company's EBITDA growth of 11.81% during the same period signals strong operational efficiency. For those interested in Oracle's investment potential, there are over 10 additional InvestingPro Tips available, which can be explored further with a special offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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