Jefferies lifts price target on Oracle on strong momentum

Investing.comDec 5, 2024 2:40 PM

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Investing.com -- Jefferies on Thursday raised its target price on Oracle Corporation (NYSE:ORCL) to $220 from $190, citing improvement in pipeline driven by infrastructure growth and AI initiatives.

Oracle’s shares have gained roughly 80% so far this year but analyst says it could climb further in case of sustained backlog momentum while converting it into revenue growth.

Oracle needs to deliver robust metrics, including a 52% growth in Oracle Cloud Infrastructure (OCI), 9% revenue growth, and 43% operating margins to meet market expectations, Jefferies said.

Infrastructure growth is expected to offset lower application growth, said Jefferies citing a survey of 20 Oracle partners highlighted optimism for fiscal 2024. It noted that 70% of respondents met or exceeded their second-quarter plans. Additionally, partners reported sequential pipeline improvements and see AI initiatives as a key driver of future growth.

"Customers have shifted their focus from cloud cost optimization back to modernizing their workloads for AI," the note said.

Despite trading at a premium valuation of 38 times estimated 2025 GAAP earnings per share, compared to Microsoft’s 32 times, Jefferies maintained a “buy” rating on Oracle, raising its price target to $220.

"Oracle will also need to start converting backlog to revenue for the stock to continue working," the analysts added.

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