Jefferies reiterates Buy rating on Oracle stock, maintains $360 price target

Oracle (ORCL) is demonstrating strong momentum in the AI cloud market, evidenced by a monumental $300 billion cloud contract with OpenAI and significant quarter-over-quarter growth in remaining performance obligations (RPO) from large AI deals. Jefferies reiterated a Buy rating with a $360 price target, projecting approximately 75% upside based on anticipated fiscal year 2030 EPS and expecting management to substantially raise long-term revenue targets at the upcoming analyst day, further reinforcing Oracle's strategic positioning.

Analysis

Oracle is demonstrating significant traction in the artificial intelligence infrastructure market, underscored by a monumental $300 billion, five-year cloud contract with OpenAI. This deal, one of the largest of its kind, provides substantial validation for the competitive positioning of Oracle Cloud Infrastructure (OCI). The financial impact is reflected in the company's remaining performance obligations (RPO), which grew by $317 billion quarter-over-quarter and 359% year-over-year, driven by large AI contracts. This has triggered a wave of positive analyst revisions, with Jefferies reiterating a Buy rating and a $360 price target, projecting a 75% upside based on estimated fiscal year 2030 EPS of around $20. Other firms, including BNP Paribas and TD Cowen, have raised price targets to $377 and $375, respectively. A key near-term catalyst is the upcoming analyst day, where management is expected to revise fiscal 2029 revenue targets upward by at least 50%. Despite the stock's 96.86% gain over the past six months, it has experienced a 15% pullback from recent highs, which some analysts view as a buying opportunity, though DA Davidson maintains a more cautious Neutral rating.

Key Decisions for Investors

• Consider the recent 15% pullback as a potential entry point, given the strong validation from the $300 billion OpenAI contract and broad-based analyst upgrades.
• Investors should closely monitor the upcoming analyst day for the anticipated upward revision to long-term revenue guidance, which could act as a significant near-term catalyst.
• While the growth outlook is strong, be mindful of valuation after the stock's significant 96.86% run-up over six months and balance bullish positions with the fact that some analyses suggest it is trading above fair value.