On Tuesday, BMO Capital Markets maintained its Market Perform rating on shares of Oracle Corporation (NYSE:ORCL) but increased the price target to $205 from $173. The adjustment follows Oracle's recent financial performance, which included a 50% year-over-year (y/y) growth in Cloud Current Remaining Performance Obligations (CRPO) and a 21% y/y increase in Cloud Revenue Performance Obligations (RPO).
According to InvestingPro data, Oracle's stock has surged 82.85% year-to-date and currently trades near its 52-week high of $198.31.
The analyst from BMO Capital highlighted Oracle's cloud services revenue growth, which met their expectations at approximately 24% y/y on a constant currency (CC) basis. Although the conversion from RPO was considered slightly disappointing, the overall results were seen as healthy.
Moreover, Oracle's expense management was noted as impressive, especially given the mix headwinds the company faced. This effective cost control contributed to a 60 basis points y/y increase in operating margins. The company maintains strong profitability with a gross profit margin of 71.26% and generates annual revenue of $54.93 billion.
The decision to raise the price target to $205 is based on a 28 times multiple of the forecasted fiscal year 2026 (FY26) earnings per share (P/E). The firm indicated that the new target price reflects the company's consistent solid performance in RPO.
In the report, the analyst also mentioned the potential for a more positive outlook on the stock, stating that a more attractive entry point could lead to a more constructive stance. This comment suggests that while the current rating remains unchanged, there could be room for an upgrade if the stock's valuation becomes more compelling.
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