Analyzing the Potential Upside:
“For those willing to take a ‘glass half full’ approach, the guidance implies revenue acceleration, and the company is witnessing a significant growth in backlog,” emphasized Evercore ISI analyst Kirk Materne in a client note. He further stated that if OCI growth stabilizes around 50% in the coming quarters, the risk/reward ratio leans heavily towards the upside. Despite lowering his price target to $130 from $135 in a recent note, Materne continues to maintain an outperform rating on Oracle shares.
Bernstein analyst Mark Moerdler emphasizes that Oracle’s smaller data centers, compared to its hyperscaler peers, result in an imbalance between demand and supply. However, he feels confident that Oracle will address these challenges, as it did with server supply issues in the past. Moerdler believes that even though supply chain issues persist, strong demand will eventually drive results, especially in the second half and fourth quarter. He raised his price target to $147 from $144 and maintains an outperform rating on Oracle’s stock.
Supportive of the positive outlook, Wolfe Research’s Alex Zukin maintains an outperform rating and expects accelerating organic cloud growth in the next quarter. Zukin acknowledges that although shares have pulled back, management’s commitment to its targets, the ramping up of capacity, stable demand trends, and no limitations on Oracle’s data center build-out due to graphics processing unit availability, reinforce the positive sentiment. Zukin recently adjusted his price target to $130 from $140.
Perceived Market Expectations:
Sebastien Naji of William Blair questions whether an improvement in business trends would genuinely surprise Wall Street. While acknowledging solid demand momentum in OCI, Naji believes that Oracle’s stock already reflects the anticipated revenue acceleration and generative AI tailwinds. Thus, he maintained his market-perform rating on Oracle.