By Barclays analyst Raimo Lenschow raises rating and target price
Oracle stock (ticker: ORCL) received a significant boost on Tuesday, thanks to Barclays analyst Raimo Lenschow. Lenschow upgraded his rating on the stock from Equal Weight to Overweight and raised the target price to $150 from $126.
Steady Growth and Positive Outlook
Lenschow’s research note highlights Oracle’s potential for solid growth at high margins over the next few years. He attributes this growth to a positive mix shift towards the company’s Oracle Cloud business and the increasing demand for the cloud-based version of its enterprise application software. The key factor driving this growth is Oracle Cloud, especially due to its compatibility with generative artificial-intelligence workloads. This positive outlook aligns with Lenschow’s earlier observations from over two years ago when he first noted Oracle’s shift to the cloud in a detailed feature story.
Favorable Position for AI Workloads
Lenschow emphasizes that Oracle Cloud is well-positioned to handle AI workloads, thanks to its close relationship with Nvidia (NVDA). This partnership allows Oracle to leverage Nvidia’s expertise in artificial intelligence, further strengthening its offerings in this space.
Echoing Optimism
UBS analyst Karl Keirstead echoes Lenschow’s positive sentiments. In a recent upgrade, Keirstead also raised his rating on Oracle stock to Buy from Neutral, with a target price of $140.
Oracle stock currently trades at $122.73, reflecting a 1.5% increase for the day. With a year-to-date increase of 49%, the stock continues to demonstrate impressive performance.
Oracle Cloud’s Promising Trajectory
Oracle Cloud Infrastructure (OCI) may not surpass the colossal size of Amazon Web Services (AWS) or Microsoft Azure. However, according to Lenschow, this is not a crucial factor, considering Oracle’s smaller scale. What truly matters is that OCI is growing in a comparable manner to AWS and Azure when they were at a similar stage.
Strengthening Position in Software-as-a-Service
Oracle also maintains a favorable position in the software-as-a-service (SaaS) market. Their Fusion and NetSuite financial tools are expected to excel, placing them as the preferred platform for enterprise resource planning, human-capital management, and supply-chain management. In comparison to competitors like SAP and Workday, Oracle’s applications exhibit a promising advantage.
Projected Stock Growth
Lenschow predicts that Oracle stock will continue to rise. The company’s valuation is deemed reasonable, with an estimated calendar 2024 earnings per share multiple of approximately 20. As a result, there is potential for further improvement in the stock’s rating.
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