On Monday, Evercore ISI maintained a positive stance on Oracle Corporation (NYSE:ORCL), reiterating an Outperform rating with a steady price target of $145.00. The firm acknowledged the mixed nature of Oracle's quarterly results which often present factors for both optimism and caution. The anticipation of a solid fourth quarter (F4Q) and a fiscal year 2025 (FY25) guidance that aligns with current estimates was cited as a positive indicator for the company's stock at its current price levels.
Oracle's performance year-to-date (YTD) has been strong, and Evercore ISI sees the potential for further gains in the stock over the next six months. This optimism is based on Oracle's strategic position within the expansive public cloud market and emerging opportunities in artificial intelligence (AI), particularly with Oracle's xAI initiatives. While acknowledging near-term challenges such as a tougher comparison year for Oracle Cloud Infrastructure (OCI) and broader macroeconomic pressures, the firm expects Oracle to maintain its forecast of 50% OCI growth in FY25 and to uphold its FY26 revenue prediction of $65 billion, which surpasses current estimates.
The firm also commented on the expected progression of revenue throughout FY25, noting that it wouldn't be surprising to see a back-end loaded year. This is partly because larger OCI deals may take additional time to reflect in revenue as capacity ramps up. Additionally, the impact on total revenue from Oracle's acquisition of Cerner (NASDAQ:CERN) is anticipated to lessen in FY25, supporting a forecast of high single-digit revenue growth.
The analysis further mentioned capital expenditure and remaining performance obligations (RPO) as factors that could bolster the bullish case for Oracle, although visibility into these metrics remains limited. With Oracle's stock trading at 19 times the calendar year 2025 estimated earnings per share (EPS), Evercore ISI believes the opportunities associated with OCI are sufficient to counterbalance the typical uncertainties that accompany Oracle's quarterly results when viewed from a three to six-month perspective.
In other recent news, Elon Musk's xAI is set to construct a supercomputer by fall 2025, potentially in collaboration with Oracle. The supercomputer will support the development of the next AI chatbot, Grok, and will be powered by Nvidia (NASDAQ:NVDA)'s flagship H100 GPUs. Meanwhile, Oracle has rolled out new AI tools for its Oracle Fusion Cloud Customer Experience (CX), aimed at improving customer satisfaction and accelerating deal cycles. These enhancements are built on Oracle Cloud Infrastructure (OCI) and ensure customer data privacy and security.
Oracle also announced the availability of NVIDIA AI Enterprise on Oracle Cloud Infrastructure Supercluster for U.S. government agencies, aiming to accelerate sovereign artificial intelligence. This integration offers over 100 cloud services, including generative AI services powered by NVIDIA's GPUs. UBS maintained a buy rating for Oracle shares, focusing on the potential effects of a TikTok ban or divestiture on Oracle's role as the main cloud infrastructure provider for TikTok in the United States.
Finally, Oracle's cloud regions have been accredited by the U.S. Department of Defense (DoD) at Defense Information Systems Agency (DISA) Impact Level 6 (IL6), enabling the hosting of Secret classified workloads. This accreditation allows for the integration of data analytics, AI, and high-performance computing to support real-time decision-making for U.S. warfighters.
InvestingPro Insights
Oracle Corporation (NYSE:ORCL) continues to garner attention from analysts and investors, with its strategic initiatives and financial metrics suggesting a robust business model. According to InvestingPro data, Oracle boasts a significant market capitalization of $346.09 billion, underscoring its prominence in the software industry—a key point also highlighted by InvestingPro Tips. With a P/E ratio of 32.27 and an adjusted P/E ratio for the last twelve months as of Q3 2024 at 30.32, the company trades at a premium, reflecting investor confidence in its future growth prospects. Furthermore, Oracle's revenue growth of 9.49% over the last twelve months suggests a healthy expansion pace, aligning with Evercore ISI's positive outlook for the company.
Investors may also take interest in Oracle's consistent dividend track record, as the company has raised its dividend for 10 consecutive years and maintained dividend payments for 16 consecutive years. This commitment to shareholder returns is a reassuring sign of financial stability. Additionally, Oracle's strong return over the last five years reinforces the firm's optimistic view of the stock's potential for further gains.
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