Analyzing Oracle Stock Through the Lens of AI Potential

Written By Michael Gary Scott

The brisk momentum surrounding artificial intelligence (AI) seems relentless, poised to inject a colossal $15.7 trillion into the global economy by 2030, propelling a surge in AI-related stocks. While industry giants like Nvidia, Microsoft, Google, and Amazon have enjoyed substantial gains, investors are now scouring for hidden gems in the AI landscape. Nestled in this sector is Oracle, a cloud services provider making steady strides in the AI domain.

The Legacy of Oracle Stock

Originating in 1977, Oracle, headquartered in Austin, stands as a multinational tech entity specializing in enterprise software, cloud computing systems, and hardware sales. With an impressive market cap of $342.24 billion, Oracle’s stock has surged by 18.2% YTD, surpassing broader market indices. Moreover, its consistent 1.3% dividend yield backed by nine years of growth signifies stability in tumultuous markets.

The Resilience of Oracle’s Earnings

Oracle has demonstrated unwavering performance, boasting a 5.92% and 6.69% CAGR in revenue and earnings, respectively, over the past five years. In its recent fiscal quarter, Oracle realized a 7% revenue spike to $13.3 billion, fueled by a robust 12% growth in its cloud services and license support sector. Eclipsing estimates, earnings per share soared by 16% to $1.41, marking five consecutive quarters of surpassing projections.

The buoyant performance also reflects in Oracle’s deepened AI integration, with a notable 29% YoY surge in remaining performance obligations to $80 billion. Laying a promising outlook, Oracle foresees substantial revenue recognition from the Gen2 Cloud Infrastructure segment, poised for a prolonged hypergrowth phase.

Despite its flourishing prospects, Oracle remains attractively valued compared to industry peers, sporting a forward P/E multiple of 22.29 and forward P/CF of 18.13, underpinning its promising upside potential.

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The Impact of AI Tailwinds on Oracle

Oracle’s recent upswing can be largely ascribed to securing a monumental $10 billion cloud contract from the Elon Musk-led AI startup xAI. Further amplifying its AI foothold, Oracle’s collaboration with data analytics frontrunner Palantir accentuates its expanding AI prowess.

Beyond recent developments, Oracle shines in AI innovation, elucidated by Larry Ellison’s endorsement of the company’s prowess in training AI models efficiently and cost-effectively. Notable strides in integrating generative AI features into its Fusion Cloud Applications Suite showcase Oracle’s forward-thinking in leveraging AI to unlock unparalleled value.

Revealing a glimpse of its future trajectory, Oracle unveiled intentions to construct 20 data centers in collaboration with Microsoft, earmarking substantial capital investments to fortify its data infrastructure.

Analysts’ Optimism and Outlook

Analysts resoundingly echo optimism surrounding Oracle stock, with a prevailing “Moderate Buy” rating and a mean target price of $136.39, indicating a potential upside of approximately 9.5%. With 17 analysts advocating a “Strong Buy” stance and 12 maintaining a “Hold” position, Oracle’s stock brims with promise in the AI-driven landscape.