Why BofA are buyers of weakness in this sector
Investing.com - Morgan Stanley has reiterated its Equalweight rating on Oracle (NYSE:ORCL) while maintaining its price target of $320.00, significantly above the current stock price of $223.01. According to InvestingPro data, Oracle is currently trading at a high P/E ratio of 51.3, suggesting the stock may be overvalued relative to earnings.
The firm’s analysis points to cloud growth at the lower end of Oracle’s guidance, with increasing pressure on both gross margins and operating margins for the technology company. Despite these concerns, Oracle maintains a solid gross profit margin of 68.54% with revenue growth of 11.07% over the last twelve months.
Morgan Stanley suggests these factors may further diminish investor confidence in Oracle’s ability to efficiently execute against its large and growing GPU-as-a-Service (GPUaaS) business portfolio.
The research note indicates that Oracle shares currently lack a clear catalyst for significant movement in the near term.
Morgan Stanley has placed its price target and estimates for Oracle under review following this assessment of the company’s current business position.
In other recent news, Oracle’s latest earnings report has led several analyst firms to adjust their price targets. Stifel lowered its target to $275 from $350, citing concerns over increased capital expenditure plans, despite a 15% quarter-over-quarter growth in remaining performance obligations (RPO). BMO Capital also reduced its target to $270 from $355, pointing to lackluster revenue, particularly in the Cloud Services segment, though they acknowledged positive operating cash flow. Evercore ISI adjusted its price target to $275 from $385, noting Oracle’s $68 billion sequential increase in RPO and projecting $4 billion in Oracle Cloud Infrastructure revenue by fiscal year 2027 as indicators of long-term growth potential.
Meanwhile, Mizuho and Jefferies maintained their price targets at $400, despite mixed quarterly results. Mizuho highlighted a modest revenue miss driven by weakness in Oracle’s license business, while Jefferies pointed to an "asymmetric risk/reward" scenario, emphasizing Oracle’s backlog of $523 billion and a 66% year-over-year growth in Infrastructure-as-a-Service. These developments reflect a varied analyst outlook on Oracle’s future performance, with some firms focusing on the company’s long-term growth potential and others expressing caution due to recent financial results.
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