Tuesday, Stifel, a financial services firm, raised the price target for Oracle Corporation (NYSE: NYSE:ORCL) to $120 from the previous $100, while maintaining a Hold rating on the stock. The adjustment comes after Oracle reported earnings that met Wall Street’s expectations, with a notable performance in cloud services, particularly in licenses, which was somewhat balanced by a weaker showing in their services segment.
The company showcased a robust bookings performance, with Remaining Performance Obligations (RPO) growing by 41% year-over-year, excluding contributions from Cerner (NASDAQ:CERN). Oracle's management has reiterated their confidence in achieving their fiscal year 2026 goals, citing plans for additional cloud capacity expansion.
Despite this optimism, it was noted that Oracle's capital expenditures (capex) decreased by approximately 36% compared to the previous year, and expectations for fiscal year 2024 capex were lowered to between $7 billion and $7.5 billion from the prior estimate of $8 billion.
Looking ahead, Oracle's management anticipates that capex will reach around $10 billion in fiscal year 2025, driven by the backlog for Oracle Cloud Infrastructure (OCI). The company expects that cloud migrations of existing customers, new artificial intelligence workloads, and the database partnership with Azure will provide positive momentum.
However, Stifel remains cautious, suggesting that Oracle's win rates may not significantly improve as competitors are investing more aggressively in capacity and technology.
After the market closed, Oracle's shares were trading at $129.94, which is approximately 30 times Stifel's estimated calendar year 2025 price to free cash flow (P/FCF) of about $12.2 billion. This valuation is in line with the 26 to 30 times range seen among Oracle's peers. Stifel's revised price target of $120 is based on applying a multiple of roughly 28 times to their estimated calendar year 2025 P/FCF for Oracle.
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