By Oracle Corporation (NYSE: ORCL) continues to hit new all-time highs as the stock has been on an impressive upward trajectory, driven by strong earnings results and strategic moves in the cloud and AI sectors.
The company’s momentum has seen its shares climb nearly 66% year-to-date, outpacing many of its cloud and software peers.
Analyst ratings and divergent views
Today, on October 23, RBC Capital initiated coverage on Oracle with a “Sector Perform” rating and a $165 price target.
This rating comes at a critical juncture as Oracle’s stock has been making new all-time highs recently.
Despite RBC’s recognition of Oracle’s strong positioning in cloud transformation and enterprise resource planning (ERP) solutions like Fusion and NetSuite, the firm raised concerns about intensifying competition and the uncertain long-term benefits of the AI boom.
RBC analyst Rishi Jaluria highlighted Oracle’s cloud gross margins of over 70% and the company’s shift from its on-premise base to SaaS, which should support long-term earnings growth.
However, RBC’s price target is approximately 5% below Oracle’s current trading level, reflecting caution among analysts regarding near-term stock performance.
Apart from RBC, several firms have issued contrasting ratings on Oracle rally.
Morgan Stanley maintained its “Equal-weight” rating while raising its price target to $145, citing moderate growth in bookings but highlighting risks related to margin pressure and billings growth.
Evercore, on the other hand, reiterated its “Outperform” rating and raised its price target to $175, based on strong growth in Oracle’s cloud backlog, particularly in infrastructure as a service (IaaS).
BofA raised its target to $175 but remained neutral, citing mixed outlooks on revenue and billings.
JMP Securities took a more bullish stance, upgrading Oracle to “Market Outperform” and setting a $175 price target, emphasizing accelerating organic growth and strategic cloud positioning.
Investments in AI and cloud infrastructure
Oracle recently announced a $6.5 billion investment to establish a new cloud region in Malaysia, reinforcing its commitment to AI and cloud infrastructure expansion.
The new region is set to enhance AI capabilities and provide over 150 infrastructure and SaaS offerings, including generative AI services.
This move aligns with the rising demand for AI services and reflects Oracle’s effort to strengthen its global presence amid increasing competition from other tech giants.
Oracle’s strategic partnerships, including new collaborations with Amazon Web Services (AWS) and existing ones with Microsoft Azure and Google Cloud, are expected to bolster its cloud growth.
These alliances provide Oracle with a unique competitive edge by increasing its cloud accessibility and scalability.
Oracle’s partnership with AMD to deploy new high-performance computing solutions for AI workloads further underscores its focus on capitalizing on enterprise AI.
Financial performance and future prospects
Oracle reported better-than-expected fiscal Q1 2025 earnings, with revenue growing 7% year-over-year to $13.31 billion, beating consensus estimates.
Non-GAAP EPS also surpassed expectations, reaching $1.39, supported by strong demand for Oracle Cloud Infrastructure (OCI), which saw a 46% year-over-year growth.
The company’s management reiterated its forecast for double-digit revenue growth, underpinned by increasing cloud and AI-related investments.
The reported $99 billion in remaining performance obligations (RPO) indicates robust future revenues.
Valuation
Oracle is currently trading at a forward P/E ratio of 27.8x, close to its cloud peers like Salesforce and Microsoft.
While the current valuation may appear steep relative to Oracle’s historical trading range, the company’s expanding partnerships and AI initiatives provide potential upside.
Moreover, the company’s solid profitability profile, with operating margins consistently above 40%, supports its valuation.
However, with a forward P/E near its peer average, new investors may find the risk-reward ratio less favorable at these elevated levels.
With all these developments in mind, let’s examine what the charts reveal about Oracle’s price movements and the next potential steps for its bullish rally.
Has it hit a ceiling?
After remaining range bound for more than a year starting from June 2023, Oracle’s stock has seen a rapid ascent since August this year that has caused it to reach its recent all-time highs.
Source: TradingView
Although the stock still remains strong across all timeframes, it has been recently facing resistance trading above $178.5.
Hence, investors who have no position in the stock must wait for it to give a daily closing above this resistance or go through a retracement before initiating fresh long positions.
Traders who are eyeing a short position in the stock, do have a low-risk high-reward trade on their hand.
They can go short near current levels near $176 with a stop loss at $180.2.
If the stock starts losing momentum from current levels it can fall to its near-term support near $154.6, where one can book profits.
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