On Tuesday, JPMorgan (NYSE:JPM) updated its stance on Oracle Corporation (NYSE:ORCL), raising the price target to $105 from the previous $100, while maintaining a Neutral rating on the stock. The firm's analysis suggests that Oracle is positioned to potentially outperform in the post-pandemic market due to its resilient and recurring revenue streams.
The financial institution highlighted Oracle's advantage in having over 70% of its total revenue from recurring or renewable sources, such as maintenance, which adds to the company's stability. This is in contrast to sectors with higher viability risks like airlines, hotels, energy, restaurants, and retailers.
Oracle is expected to continue benefiting from a favorable shift in its business mix. Growth is being driven by Cloud Applications, Oracle Cloud Infrastructure (OCI), and Strategic hardware, which are outpacing and increasingly dominating over the declining segments of the business.
JPMorgan also pointed out Oracle's operational discipline as a key factor in its anticipated success. The company is expected to maintain savings achieved during the pandemic, such as reduced travel, increased remote work, a smaller real estate footprint, and a workforce in lower-cost geographies. These factors are projected to contribute to operating profit growth that surpasses revenue growth.
In conclusion, the firm's revised price target reflects an optimistic outlook for Oracle as a relatively safe investment within the software sector. The company's shift towards faster-growing business areas and its resilience through recurring revenue streams are seen as significant positive indicators for its performance in a value-rotating market.
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