Video Source: CNBC Television on YouTube
The shares of Oracle (NYSE: ORCL) garnered the market’s attention yesterday after Raimo Lenschow, an analyst at Barclays, upwardly revised the tech behemoth’s rating to overweight from equal-weight, highlighting a “multi-year growth” scenario. Following the rating upgrade, the stock of Oracle ended Tuesday’s trading session at $123.98, up $3.05 or 2.52% from the prior close.
According to Lenschow, the Austin, Texas-based company is on course to record robust multi-year growth with high-profit margins. This growth is primarily attributed to the continuous positive impact of enhanced software-as-a-service offerings and the Oracle Cloud Infrastructure (OCI), which outweigh the relatively slower-growing segments within the business.
In his note to investors, the analyst further wrote that the pivotal role of Oracle Cloud Infrastructure, fueled in part by the emergence of AI workloads, will significantly contribute to the company’s database and overall performance.
Lenschow also pointed out that the continuous transition of Oracle’s solutions, namely Fusion, OCI, and NetSuite, to the cloud has been a significant driver of the company’s growth for the last few years. Barclay’s analysts anticipate that the trend will persist, given that the positive impact of this strategic shift is expected to continue unfolding over an extended period. The assumption stems from the fact that the afore-discussed three business divisions only account for less than a quarter of Oracle’s topline.
Furthermore, Lenschow predicts that OCI will gain from AI-related works as it has strong ties with Nvidia (NVDA). Specifically, the analyst pointed out that Oracle was one of the tech firms offering cloud service to employ the Santa Clara, California-based GPU (graphics processing unit or graphics card) manufacturer’s software-as-a-service offering.
Lenschow concluded by stating that there is adequate room for the continuation of investor interest in the stock.
Based on the aforesaid facts, while upgrading the Oracle stock’s rating, Lenschow lifted the price target to $150 from $126.
Oracle carries a hold rating from the authors of Seeking Alpha, while Wall Street analysts have given it a buy rating. Also, Seeking Alpha’s quant software has given the stock a hold rating. Interestingly, a week before, Karl, an analyst at UBS, gave a buy rating for Oracle, citing similar AI-related reasons.
The rating upgrade is expected to keep the stock of Oracle slightly bullish in the short term.
The historical price chart indicates that the stock of Oracle is rising after breaking the ascending triangle. The base of the triangle is now acting as support. Additionally, the stochastic oscillator is in the bullish region while the stock is trading above its 50-day moving average. Therefore, we anticipate the stock price of Oracle to remain in an uptrend in the short term.
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