Share prices of Oracle (ORCL +6.47%) surged to new highs last week after reporting strong financial results in the most recent quarter. Strong growth in Oracle's cloud services business amid the artificial intelligence (AI) spending boom underway is getting Wall Street's attention.
Analysts at William Blair upgraded Oracle to outperform (buy) with a $160 price target, representing 26% upside from the current share price of $127. Comments from management on the recent earnings call suggest the company could be at the start of a major growth spurt.
NYSE: ORCL
Key Data Points
Why buy Oracle stock
Oracle's cloud revenue, including infrastructure-as-a-service and software-as-a-service revenue, grew 25% year over year in the fiscal 2024 third quarter ending in February. But Wall Street is most excited about what this demand is doing for the company's profitability.
Oracle's adjusted earnings per share grew 16% year over year last quarter. The strong outlook for more growth, in addition to the stock's reasonable forward price-to-earnings ratio of 20, could justify new highs in the near term.
On the earnings call, Chairman and Chief Technology Officer Larry Ellison said, "Cloud infrastructure demand is huge and growing at an unprecedented rate. In the next few weeks, we expect to sign a couple more billion-dollar cloud infrastructure contracts."
As a result, analysts are raising their long-term earnings growth expectations. The Wall Street consensus currently calls for Oracle's adjusted earnings to grow nearly 14% per year.
The stock's reasonable valuation could support new highs in 2024, but solid growth prospects in the AI race could support greater returns for investors over the next several years.
