Overview
Oppenheimer has moved Oracle Corp. (NYSE:ORCL) up to an Outperform rating from Perform and assigned a price target of $185.00. The stock was trading at $146.14, a level that sits 58% below its 52-week high of $345.72 and reflects a 37.7% decline over the prior six months.
Valuation and rationale
The upgrade stems principally from what Oppenheimer sees as an improved risk-reward profile following a steep contraction in Oracle’s valuation multiples - which the firm says have fallen by more than half since September. Oppenheimer noted that the move may be somewhat early given Oracle’s transition toward a more capital-intensive operating model, but the firm argues the longer-term earnings trajectory justifies the call.
In its analysis, Oppenheimer forecasts that Oracle’s earnings per share will double by fiscal year 2030 in the firm’s base case, even after applying a 25% reduction to management’s revenue guidance. The research team highlighted the company’s potential for earnings compounding as a central reason for the upgrade.
Risk mitigation and customer traction
Oppenheimer pointed to actions that have begun to ease several risks around counterparties, financing and execution. These include Oracle’s recent capital raise and the company’s announcements of sizeable customers, specifically naming OpenAI and TikTok. The firm said those developments reduce near-term financing and counterparty concerns.
The research note also argued Oracle is relatively shielded from artificial intelligence disruption, contrasting it with negative sentiment that has pressured software-as-a-service valuations. Oppenheimer added that Oracle remains underowned by institutional investors, a dynamic the firm sees as adding to the upside potential should sentiment shift.
Broader analyst and regulatory reactions
Oracle disclosed plans for a $45 billion to $50 billion debt and equity program intended to fund expansion of its AI datacenter footprint. That financing plan has prompted a range of responses among sell-side firms.
Bernstein trimmed its price target for Oracle from $339.00 to $313.00 while maintaining an Outperform rating. Citizens lowered its target to $285.00 from $342.00 in the wake of Oracle’s $30 billion debt financing. DA Davidson upgraded Oracle from Neutral to Buy, citing the outlook for OpenAI and expressing the view that OpenAI will reassert a competitive position against Google in the AI market.
On the regulatory front, Michigan Attorney General Dana Nessel has raised concerns about the power plan for the Oracle and OpenAI data center, requesting a review of the approval granted to DTE Energy. Nessel’s motion contends conditions were not fully accepted to ensure customers would not end up subsidizing data center costs. These regulatory questions add another variable to the picture as Oracle pursues its datacenter expansion.
Research access
For investors seeking more detail, the note points to Oracle’s Pro Research Report available through InvestingPro, which covers over 1,400 U.S. equities and includes a comprehensive analysis of the company.
Bottom line
Oppenheimer’s upgrade reflects a judgment that the downside from current levels is limited relative to the upside, driven by materially lower valuation multiples, a projected doubling of EPS by 2030 under base assumptions, and easing financing and execution risks following recent capital actions and customer commitments. However, the firm acknowledges timing risks as Oracle reorients toward a more capital-intensive model.
Key points
- Oppenheimer upgraded Oracle to Outperform from Perform and set a $185 price target.
- The firm expects Oracle’s EPS to double by fiscal 2030 in its base case, despite reducing management revenue guidance by 25%.
- Oracle’s $45 billion to $50 billion financing plan to expand AI datacenters has prompted mixed analyst reactions and regulatory scrutiny.
Risks and uncertainties
- Transition to a more capital-intensive business model could make timing of the upgrade premature - impacting financials and capital allocation.
- Counterparty, financing and execution risks remain potential headwinds despite recent capital raises and customer announcements.
- Regulatory review of the data center power approvals raises the possibility of additional conditions or delays that could affect project economics.