On Tuesday, Oracle Corporation (NYSE:ORCL) saw an increase in its price target from $160.00 to $175.00 by Evercore ISI, while the firm maintained an Outperform rating on the stock. The adjustment followed Oracle's solid first-quarter results, which were notably marked by a significant 46% year-over-year growth in Infrastructure as a Service (IaaS) in constant currency terms.
The company's management has indicated that they anticipate growth to accelerate throughout fiscal year 2026. Although Oracle's earnings per share (EPS) benefited from a lower tax rate and some one-time advantages due to changes in the useful life of certain assets, Evercore ISI emphasized that the real highlight is the robust growth in cloud backlog, as indicated by a 52% year-over-year increase in Remaining Performance Obligations (RPO) in constant currency.
At the CloudWorld event this week, expectations are set for Oracle to present its comprehensive cloud and artificial intelligence (AI) strategy, which supports a sustainable double-digit growth outlook. Details regarding Oracle's partnerships with hyper-scalers and advancements in Generation AI are also anticipated.
The positive outlook is further supported by the belief that Oracle's ongoing collaborations with Azure, Google (NASDAQ:GOOGL) Cloud Platform (GCP), and now Amazon (NASDAQ:AMZN) Web Services (AWS) will enhance the ease with which customers can transition their databases to the cloud. This ease of transition is seen as a potential boon to Oracle's cloud database business.
Evercore ISI has revised its estimates upward in response to the company's performance and guidance, which points to a revenue target of $65 billion and operating margins of 45% by fiscal year 2026.
This guidance, along with the potential for Street estimates to align more closely with the company's projections, is expected to contribute to further multiple expansion from current levels.
Consequently, the price target of $175 is based on the stock trading at 26 times the estimated CY25 EPS, reinforcing the Outperform rating.
InvestingPro Insights
Oracle Corporation's (NYSE:ORCL) recent performance and future prospects have caught the attention of investors and analysts alike, with Evercore ISI raising its price target following strong quarterly results. Delving into the financial metrics, Oracle boasts a robust market cap of $385.52 billion, reflecting the company's substantial presence in the market. Despite trading at a high earnings multiple with a P/E ratio of 36.89, Oracle has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years—an indicator of financial stability and confidence in sustained profitability.
InvestingPro Tips highlight Oracle's prominence in the software industry and its ability to maintain dividend payments for 16 consecutive years. This consistency in dividend payments underscores Oracle's financial discipline and operational efficiency. The company's revenue growth over the last twelve months stands at 6.02%, showcasing its ability to expand its top-line in a competitive sector. For investors seeking further insights and tips on Oracle, InvestingPro offers additional in-depth analysis and metrics, with 15 more InvestingPro Tips available that could help in making informed investment decisions.
As Oracle continues to evolve its cloud and AI offerings, its strategic partnerships with major cloud providers could further enhance its market position. The company's solid financial foundation, combined with its strategic growth initiatives, positions it favorably for the future, as reflected in the upward revision of its price target by Evercore ISI.
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