On Wednesday, Oracle Corporation (NYSE:ORCL) received an optimistic outlook from KeyBanc, as the firm initiated coverage on the stock with an Overweight rating and set a stock price target of $150.00. The coverage initiation stems from the potential growth of Oracle's Cloud Infrastructure (OCI), with expectations that standalone OCI growth will sustain above 50% this year and into the next.
KeyBanc's coverage notes the critical role of OCI growth in shaping investor reactions to Oracle's quarterly earnings. The firm draws parallels to the growth trajectories of other major cloud services like Azure and AWS, suggesting that Oracle is at a pivotal revenue marker that historically indicates significant capital expenditure efficiency and potential for higher growth rates.
The analysis also addresses the competitive landscape, downplaying the threat posed by standalone vector database vendors to Oracle's market share. KeyBanc suggests that Oracle's addition of vector capabilities to its existing database offerings, which support the RAG technique, should adequately retain its large installed customer base.
On the valuation front, KeyBanc's price target is based on 29 times the firm's calendar year 2025 free cash flow forecast. This valuation represents a discount compared to Oracle's current trading multiples and is justified by a compound annual growth rate (CAGR) of 15.8% from calendar year 2023 to 2026, which positions Oracle attractively among its large-cap peers when adjusted for growth.
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