On Friday, Citi reaffirmed its Neutral stance on Oracle Corporation (NYSE:ORCL), maintaining a price target of $157. The financial institution's analysis followed Oracle's recent Analyst Day, where the company presented ambitious financial targets for fiscal year 2029, suggesting a compound annual growth rate (CAGR) of over 16% for revenue and more than 20% for earnings per share (EPS) from fiscal year 2026 to fiscal year 2029.
The analyst day, held on Thursday, showcased Oracle's strong messaging about its Oracle Cloud Infrastructure (OCI) and the potential for converting existing applications and databases to its cloud services. The updated financial targets surpassed expectations, hinting at significant growth potential for the company.
Despite the optimistic projections, Citi expressed concerns about the feasibility of these targets, citing uncertainties in the rapidly changing technology landscape, especially with the emergence of generative AI and its impact on the durability of AI workloads. The firm noted that the details on how Oracle plans to achieve these targets were not fully disclosed.
Oracle's stock has shown a remarkable performance, indicated to rise another 6% in pre-market trading following a 13% increase after the quarterly report and a 55% year-to-date gain. However, with the current valuation standing at around 45 times the next twelve months' enterprise value to free cash flow (EV/FCF), Citi prefers to remain cautious, opting to wait for a more opportune entry point or greater confidence in Oracle's database migration strategy.
InvestingPro Insights
Oracle Corporation (NYSE:ORCL) has been a topic of discussion after its recent Analyst Day, with ambitious financial targets catching the eye of investors and analysts alike. To provide further context to Oracle's market position and outlook, here are some selected insights based on real-time data from InvestingPro and InvestingPro Tips:
Oracle's market capitalization stands robust at $447.18 billion, reflecting the company's substantial presence in the industry. The company's Price-to-Earnings (P/E) ratio is currently at 40.52, which is high relative to near-term earnings growth, suggesting a premium valuation for the stock. Additionally, Oracle's revenue growth over the last twelve months as of Q1 2023 has been 5.6%, indicating a steady increase in its financial performance.
InvestingPro Tips highlight that Oracle has raised its dividend for 11 consecutive years, demonstrating a commitment to returning value to shareholders. However, 11 analysts have revised their earnings downwards for the upcoming period, which may signal caution regarding near-term growth expectations. Moreover, there are 21 additional tips listed on InvestingPro for Oracle, offering deeper insights for those considering investment decisions.
While Citi remains neutral on Oracle with a price target of $157, it's worth noting that Oracle's stock has been trading near its 52-week high, with a price 99.41% of that peak. This could align with Citi's cautious stance, as the stock's high valuation multiples may warrant a careful approach. Nevertheless, the company's strong performance over the past year, with a 46.27% return, cannot be overlooked by investors.
For a more comprehensive analysis, including additional InvestingPro Tips for Oracle, interested readers can visit: https://www.investing.com/pro/ORCL.
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