Oracle shares powered to a fresh record high in early Tuesday trading as analysts rushed to update their ratings and price targets on the software group following better-than-expected quarterly earnings and a solid near-term outlook.
Oracle (ORCL) is looking to expand its cloud-services business, anchored by its Gen2 offering tied to partnerships with Nvidia (NVDA) , Google (GOOGL) and Microsoft (MSFT) .
It also is seeing solid growth from other key business lines, thanks in part to a surge in artificial-intelligence investments.
A new deal with Amazon Web Services (AMZN) is also slated to add to overall cloud revenue, Oracle said, as it scales its offering over the biggest hyperscaler systems.
Catz told investors that she remained “very confident and committed to full-year total revenue growth growing double digits.” Earnings were forecast in the region of $1.45 to $1.49 a share, nudging just ahead of Wall Street estimates.
“The guidance for capex and [Oracle Cloud Infrastructure] growth was reiterated, so clearly the expectation from management is that it’s a timing thing, but something to watch,” said Ader, who nonetheless added $10 to his Oracle stock price target, taking it to $175 a share, while affirming an ‘overweight’ rating.
Davidson analyst Gil Luria, who added $35 to his Oracle price target, taking it to $140, after last night’s earnings, said demand for AI training would likely continue to lift the group’s near-term sales.
“Demand for generative-AI compute remains a significant driver for [Oracle Cloud Infrastructure], with management noting they’re continuing to add capacity that’s leading to what they expect will be roughly $15 billion in capital expenditures this fiscal year,” Luria said.
Morgan Stanley analyst Keith Weiss took his Oracle price target $20 higher, to $145.
The stock hit an all-time high of $160.52 earlier in the session.
As analysts hurried to revise their ratings and price targets on the software group in the wake of better-than-expected quarterly earnings and a strong near-term outlook, Oracle shares surged to a new record high in early Tuesday trading.
With its Gen2 offering, which is based on partnerships with Nvidia (NVDA), Google (GOOGL), and Microsoft (MSFT), Oracle (ORCL) is hoping to grow its cloud-services business. Other important business lines are also seeing strong growth, in part because of an increase in investments in artificial intelligence.
Infrastructure as a service, or IaaS, revenue for the company’s fiscal first quarter ended in August increased by 45% year over year to $2.2 billion, significantly outpacing the 10% growth in software as a service revenue.
Oracle stated that as it expands its offering across the largest hyperscaler systems, a new agreement with Amazon Web Services (AMZN) will also increase overall cloud revenue.
On a late-night conference call with investors, CEO Safra Catz stated, “Needless to say, we think our multicloud strategy will expand the ubiquity and popularity of our differentiated technologies, especially the Oracle Database.”.
“Our cloud regions’ deployability and sizing flexibility remain major competitive advantages for us,” she continued.
Oracle’s Q4 revenue forecast was essentially in line with Wall Street estimates, with overall revenue expected to rise between 8% and 10% from a year ago. Catz expressed her continued “great confidence and commitment to double-digit growth in total revenue for the entire year” to investors. “.
In the range of $1.45 to $1.49 per share, earnings were predicted to be slightly higher than Wall Street projections.
Oracle has almost $100 billion in backlog overall.
Analysts and investors refer to the group’s unbilled revenue as RPO, or remaining performance obligations. This portion of the backlog increased by approximately 52% to $99 billion, indicating the group’s ability to sustain its capital-spending plans and highlighting the significance of recent agreements with Nvidia and the range of demand.
According to CFRA analyst Angelo Zino, who maintained his hold rating and $150 price target on Oracle stock, “We think IaaS remains the key growth driver, more than doubling in two years and should accelerate through the 2025 fiscal year, supported by cloud expansion plans.”.
“Growth will be further stimulated by securing alliances with the three largest cloud providers over the past year, following the signing of a multicloud agreement with AWS,” he continued.
Oracle is now beginning to see a genuine acceleration in revenue growth as it “successfully evolves into a leading strategic cloud platform services provider,” according to JMP analyst Patrick Walravens, who raised his Oracle rating to “market outperform” with a $175 price target. “. .
“Oracle is well-positioned to capture share of the massive cloud infrastructure services market, which is expected to exceed $140 billion in 2023, thanks to Chairman Larry Ellison’s foresightful investments in large Nvidia [graphics processing unit] clusters, 160+ cloud regions, including sovereign and national security regions, and a distributed and multi-cloud architecture,” according to Walravens. A particular advantage of Oracle is its ability to capture share of generative-AI-related spending for the infrastructure and cloud services market.
Oracle’s capital expenditures: KeyBanc is “something to watch.”.
But according to Jackson Ader of KeyBanc Capital Markets, there is still a “lingering question around the Company’s ability to secure the infrastructure that it needs to make sure the [booked sales] flows into revenue in a timely fashion,” given Oracle’s modest capital spending plans, which total about $2.3 billion. “.
“Capex and [Oracle Cloud Infrastructure] growth guidance was reiterated, so clearly the expectation from management is that it’s a timing thing, but something to watch,” Ader stated. Despite this, he raised his target price for Oracle stock by $10, to $175 per share, and maintained a “overweight” rating against it.
D. An. The demand for AI training would probably continue to drive the group’s near-term sales, according to Davidson analyst Gil Luria, who raised his price target for Oracle to $140 after last night’s earnings.
“Management has noted that they’re continuing to add capacity, which is leading to what they expect will be roughly $15 billion in capital expenditures this fiscal year,” Luria said. “Demand for generative-AI compute remains a significant driver for [Oracle Cloud Infrastructure].”.
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In addition, Piper Sandler analyst Brent Bracelin raised his price target by $25 to $175 per share, and Siti Panigrahi of Mizuho increased it by $15 to $185.
Oracle’s price target was raised by $20 to $145 by Morgan Stanley analyst Keith Weiss.
In the course of Tuesday’s trading, Oracle shares increased 11 points 47 percent to close at $155 points89. This brings the stock’s six-month gain to approximately 36 points 6 percent and places the Santa Clara, California-based company’s valuation at $430 billion. An all-time high of $160.52 was reached by the stock earlier in the session.
