Oracle Analyst Turns Bullish On Stock Ahead Of Q4 Print On 'AI Narrative Tailwinds'

Database giant Oracle Corp. ORCL is scheduled to release its fiscal year fourth-quarter results Monday after the market close. An analyst at Wolfe Research upgraded the shares on the eve of the Austin, Texas-based company's earnings announcement.

The Oracle Analyst: Alex Zukin upgraded Oracle shares from Peer Perform to Outperform and assigned a price target of $130 for the stock, suggesting scope for an 18.3% upside from current levels.

The Oracle Thesis:

Accelerating Growth: Oracle will likely see an acceleration in top-and bottom-line growth from Oracle Cloud Infrastructure, or OCI, adoption and artificial intelligence, or AI, tailwinds, analyst Zukin said in a note published on Sunday.

OCI will likely be the engine of growth for the company over the next three years, he said. The analyst sees OCI doubling its market share from 2% to 5% by the calendar year 2025, thanks to architectural cost advantages, intelligence partnerships, and an early-mover advantage in GenAI.

“We see the potential for a solid 4Q report coupled with AI narrative tailwinds to drive a narrative re-rating from today's high-teens EPS multiple to somewhere closer to the mid-20s,” Zukin said.

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The company has created a meaningful second-mover architectural and cost advantage around Gen 2 OCI that competitors are either unable or unwilling to match, he added.

“In addition, we see ORCL’s investment in and plans to use Cohere to sell LLMs as a solid second option to the MSFT [Microsoft Corp. MSFT] OpenAI partnership giving enterprise customers a real choice,” the analyst said.

Q4 Expectations: Zukin said he sees a top-line beat, driven by Cloud outperformance, and a potential for above-consensus first-quarter guidance, citing the improving tone of his checks.

Analysts, on average, expect the company to report earnings per share of $1.58, up from the year ago's $1.54, and revenue of $13.73 billion, up 16% year-over-year.

Oracle Price Action: Oracle stock closed Friday's session 2.21% higher at $109.85, according to Benzinga Pro data. The stock has rallied about 36% this year.

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