On Tuesday, Stifel, a financial services company, adjusted its price target for Oracle Corporation (NYSE:ORCL), increasing it to $175 from the previous $155 while maintaining a Hold rating on the stock.
This change comes after Oracle's second-quarter performance aligned with expectations, considering unforeseen foreign exchange headwinds not accounted for in the original guidance.
Oracle's stock experienced a roughly 7% decline in after-hours trading as the company reported a $2 billion sequential decrease in Remaining Performance Obligations (RPO). Despite this, Oracle's management expressed confidence in the strength of AI-driven bookings going forward.
The company has reaffirmed its commitment to doubling its capital expenditure year-over-year to approximately $15 billion and anticipates over 50% growth in its Cloud segment for the fiscal year 2025, a figure that aligns with the 52% growth reported in the current quarter.
"We believe continued solid revenue growth is sustainable as AI infrastructure bookings strength converts into training revenue and hyperscaler database partnerships scale medium-term," Stifel said.
The optimism is partly based on the performance in the first half of the year, which Stifel views as a realistic indicator of future success.
However, with Oracle's stock trading at approximately 51 times the price to free cash flow (P/FCF) based on Stifel's calendar year 2026 free cash flow estimate of $9.9 billion, the firm suggests that the potential for significant multiple expansion may be limited at the current levels.
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