Oppenheimer has identified an opportunity for investors amid a recent decline in Oracle’s stock, leading the financial institution to upgrade the company from a “perform” to an “outperform” rating. This comes with a new price target of $185, suggesting a potential upside of 27% from current levels.
In the past year, Oracle’s shares have experienced a notable decline of 13%, with a staggering 25% drop observed this year alone. According to Oppenheimer analyst Brian Schwartz, this pullback has created a desirable entry point for investors looking for value. He emphasized that while the timing of this call may be premature—as it will take time for Oracle to demonstrate financial success in its transition to a more capital-intensive business—there is a favorable risk-reward outlook given that stock multiples have decreased by more than half since September.
Schwartz characterized Oracle as a “superior earnings per share compounder,” anticipating that this status will enhance investor sentiment and lead to greater appreciation for the stock. In his projections, he forecasts that Oracle’s earnings per share could triple in a bullish scenario and double in a conservative estimate by fiscal year 2030.
Furthermore, Schwartz noted that Oracle is effectively managing its risk profile, particularly concerning counterparty issues associated with OpenAI. He believes that current risks are diminishing as the company embarks on significant funding initiatives and experiences renewed growth momentum. The recent announcements regarding capital raises are expected to bolster Oracle’s cloud infrastructure growth—areas that remain relatively shielded from disruptions caused by advancements in artificial intelligence.
“The company needs to demonstrate success in its shift towards a capital-intensive business model through solid revenue and earnings per share growth,” Schwartz stated. “However, at the current share price, the downside risk appears more contained compared to other software firms. Oracle is uniquely positioned against AI disruption, given that only a small portion of its revenue mix is derived from non-financial and ERP applications, and its stock multiples have already substantially contracted.”
