Analysts are revising their price targets on Oracle shares as the stock hit a record high

Oracle shares hit a fresh record in early Tuesday trading as analysts rushed to upgrade their ratings and price targets on the software group following better-than-expected quarterly earnings and a solid near-term outlook.

Oracle (ORCL) is looking to expand its cloud services business, anchored by its Gen2 offering tied to partnerships with Nvidia (NVDA) Google (GOOGLE) and Microsoft (MSFT) . It is also seeing solid growth from other key business lines, thanks in part to increased investment in artificial intelligence.

For the company’s fiscal first quarter, which ended in August, infrastructure-as-a-service, or IaaS, revenue rose 45% from a year earlier to $2.2 billion, well above the 10% increase in revenue from software as a service.

A New Deal with Amazon Web Services (AMZN) is also slated to add to global cloud revenue, Oracle said, as it expands its offering on the largest hyperscaler systems.

“Needless to say, we believe our multicloud strategy will expand the ubiquity and popularity of our differentiated technologies, particularly the Oracle database,” CEO Safra Catz told investors on a conference call late Monday.

“This scalability flexibility and optionality of deployment of our cloud regions continue to be significant advantages for us in the market,” she added.

Oracle Cloud is fueling the five-decade-old software group’s growth thanks to increased investment in AI.

Shutterstock

Looking ahead to the current quarter, Oracle sees total revenue rising between 8% and 10% from a year earlier, a forecast that was broadly in line with Wall Street estimates. Catz told investors it remained “highly confident and committed to full-year, double-digit growth in total revenue.”

Earnings were forecast between $1.45 and $1.49 per share, beating Wall Street estimates.

Oracle’s total balance is approaching $100 billion

The group’s total rest, including unbilled revenue — known to analysts and investors as RPO or remaining performance obligations — rose about 52 percent to $99 billion, a number that could provide solid support for its plans to capital spending, while highlighting the scale of demand and the impact of recent deals with Nvidia.

“We believe IaaS remains the main growth driver, doubling over two years and should accelerate through fiscal 2025, supported by cloud expansion plans,” said CFRA analyst Angelo Zino, who reiterated his rating hold and $150 price target on Oracle stock. .

Related: Nvidia CEO Jensen Huang’s unconventional management style

“Following the signing of a multicloud agreement with AWS, further growth will be injected from the conclusion of partnerships with the three largest cloud providers over the past year,” he added.

JMP analyst Patrick Walravens, who raised his rating on Oracle to “market outperform” with a price target of $175, said the group is now starting to see a real acceleration in revenue growth as it “successfully evolves into a provider of strategic cloud platform services”.

Sign up for TheStreet’s free daily newsletter.

“Thanks to (Chairman Larry Ellison’s) far-sighted investments in large Nvidia clusters (graphics processing units), more than 160 cloud regions, including sovereign and national security regions, and a distributed and multi-cloud architecture, Oracle is poised to gain a share of the massive Cloud Infrastructure Services Market (topping $140 billion in 2023) and appears particularly well-positioned to capture share of generative AI spending in the infrastructure and cloud services market,” said Walravens.

Oracle’s capital spending ‘something to watch’: KeyBanc

KeyBanc Capital Markets analyst Jackson Ader noted, however, that Oracle’s reduced spending plans, which include about $2.3 billion in capital spending, suggest a “lingering question about the company’s ability to secure its infrastructure who needs to make sure (reserved sales) flow. in timely revenue”.

“There was a reiteration of guidance for increased investment and (Oracle Cloud Infrastructure), so clearly the expectation from management is that it’s a matter of time, but something to watch,” said Ader, who still added $10 to price target on Oracle stock, taking it. at $175 per share, while asserting an “overweight” rating.

Related: Analysts Revise Broadcom Share Price Targets After Q3 Earnings

DA Davidson analyst Gil Luria, who added $35 to his Oracle price target to $140 after last night’s earnings, said demand for AI training is likely to continue to boost the group’s sales in the near term.

“Demand for generative AI computing remains an important driver for (Oracle Cloud Infrastructure), with management noting that it continues to add capacity, leading to what is expected to be approximately $15 billion in capital expenditures this fiscal year” , Luria said.

More AI actions:

• Palantir shares are riding high on the S&P 500 for the data analytics group
• Veteran fund manager reveals stunning predictions for Nvidia stock
• Analysts reset their price target on Alphabet shares ahead of the key court event in September

Other analyst changes include a $25 price target increase from Piper Sandler analyst Brent Bracelin, who set it at $175 per share, as well as a $15 increase to $185 from Mizuho analyst Siti Panigrahi.

Morgan Stanley analyst Keith Weiss raised his price target on Oracle by $20 to $145.

Oracle shares rose 11.47 percent during Tuesday’s session to $155.89, a move that extends the stock’s six-month gain to about 36.6 percent and values ​​the Santa Clara, California-based group at $430 billion of dollars. The stock hit an all-time high of $160.52 earlier in the session.

Related: Veteran fund manager sees world of pain coming for stocks