DA Davidson moved Oracle to a Buy recommendation from Neutral on Monday and kept its price target at $180 a share, arguing that the stock's main drag - exposure to OpenAI - is becoming less severe.
Analyst Gil Luria told clients he expects a revamped OpenAI to return to being a primary challenger to Google, and that with a stabilised corporate structure and fresh capital it should fulfil obligations this year, including those to Oracle.
Luria said the market has "overshot to the downside," adding that investor concerns about OpenAI had not only depressed Oracle shares but had also weighed on the shares of Nvidia and Microsoft. He pointed to the developer's liquidity, noting OpenAI already holds as much as $40 billion in cash and could be in the process of raising up to $100 billion more by the end of the quarter. That level of funding, he argued, should underwrite the data centres Oracle is building to support the AI developer.
"The market is currently assigning the OpenAI relationship a negative value," Luria wrote. "We believe the fundraise will serve as a catalyst for outperformance."
Beyond the OpenAI angle, DA Davidson highlighted continued strength in Oracle's core software operations. Luria emphasized that "software isn't dead" and asserted customers "will not be vibe coded away," suggesting steady demand for the company's traditional enterprise offerings.
The analyst argued that Oracle's core business by itself justifies a valuation at roughly 18 times earnings, and that Oracle Cloud Infrastructure represents additional upside at this stage. The firm also flagged the addition of TikTok USA as another often-overlooked potential source of value for Oracle.
At the same time, Luria cautioned that Oracle's financial structure complicates the outlook. He pointed to roughly $130 billion of debt and $248 billion of operating lease commitments, which he said will weigh on the company for years and leave it in a precarious position.
Separately, the note references an AI-driven stock idea service, noting that ProPicks AI evaluates ORCL alongside thousands of other companies using more than 100 financial metrics. The service uses artificial intelligence to generate stock ideas and assess fundamentals, momentum, and valuation, and the note cites prior notable winners it attributes to the approach - Super Micro Computer (+185%) and AppLovin (+157%). The commentary suggests investors can check whether ORCL appears in any ProPicks AI strategies or whether better opportunities exist in the same space.
Summary
DA Davidson upgraded Oracle to Buy and kept a $180 target, arguing that reduced OpenAI risk, stable core software demand, and cloud upside justify the move. The firm also warned that Oracle's large debt and lease obligations remain significant headwinds.
Key points
- DA Davidson upgraded Oracle from Neutral to Buy and reaffirmed a $180 price target.
- Analyst Gil Luria says OpenAI's restructuring and potential fundraise could remove a major overhang and support funding for Oracle-built data centres.
- Oracle's core software business is viewed as healthy, supporting valuation at about 18x earnings, with Oracle Cloud Infrastructure seen as upside.
Risks and uncertainties
- Large financial obligations - roughly $130 billion of debt and $248 billion of operating lease commitments - could burden Oracle and affect its financial flexibility.
- Continued market concerns around OpenAI, Nvidia, and Microsoft may keep volatility in related equities until fundraise and organizational outcomes are confirmed.
- Reliance on prospective capital raises at OpenAI to underwrite data centre funding introduces execution and timing risk for the expected catalyst.