Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
Veteran database software company Oracle (ORCL +0.02%) had a prosperous Tuesday on the stock market. After its shares received a recommendation upgrade from an analyst, investors piled in to send them more than 3% higher in price. This was more than double the 1.5% gain of the S&P 500 index.
The upgrading party was UBS' Karl Keirstead, who changed his view on Oracle stock well before market open that day. In his opinion the company is now a buy, where previously he tagged it as a neutral. In pushing his recommendation up a peg, Keirstead also raised his price target to $140 per share from the preceding $120.
In a new research note, the analyst wrote that investors are underestimating the potential in the company's graphics processing unit (GPU) business. They also might not fully realize the strength of its Oracle Cloud Infrastructure (OCI) architecture.
"We could be sitting in front of 6-12 months of GPU shortage noise and we haven't even seen the $2 billion in AI start-up commitments convert to OCI usage," Keirstead wrote in the note.
Keirstead added that, to him, the "AI story" is only at the beginning, and Oracle is one tech company well poised to take advantage of what's sure to be a very long-tail trend. While the stock's valuations are fairly rich due to its popularity with investors of late, the prognosticator pointed out that it trades at a price-to-earnings multiple of only 20 at the moment.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.