Mizuho analysts believe Oracle (NYSE:ORCL) stock is poised for further gains, citing several factors that could attract more investors to the tech giant.
"With Software sector (IGV) flat to down YTD, the list of real Software winners this year is quite small," states the Mizuho note. Oracle's impressive performance, up 27% YTD, stands out against this backdrop.
Mizuho highlights the potential for increased investment in Oracle due to its position as a relatively low-volatility, alpha-generating stock within the software sector. Growth and tech funds, pressured by the strong performance of semiconductor stocks, might look to diversify their holdings.
"Most PMs have been forced to reduce exposure YTD to Software and rotate into Semis / Hardware AI winners," the report observes. However, they state, "ORCL, with its now $370B market cap and +27% YTD appreciation, is dangerous for any relative manager."
Nevertheless, Mizuho also points to Oracle's recent momentum and potential for continued growth in its cloud business (OCI). They acknowledge skepticism surrounding the sustainability of OCI growth, but emphasize Oracle's conservative forward guidance and strong cloud bookings.
"CFO Safra Catz also guided for Q/Q rev growth to accelerate all Throigh FY25 quarter," the note highlights. Additionally, Mizuho believes Oracle's recent cloud partnerships with Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL) Cloud Platform (GCP) position them well for future growth.
The report concludes by mentioning Oracle's aggressive cost management strategies, which have helped maintain healthy operating margins despite lower core business revenue.
Overall, Mizuho analysts view Oracle as a compelling investment opportunity within the tech sector, with its strong YTD performance, potential for further cloud growth, and focus on cost control attracting investors seeking stability and alpha