Buy this tech stock as cloud business growth accelerates, Stifel says

Stifel upgraded Oracle (ORCL) to Buy from Hold, raising its price target to $250, citing sustainable cloud acceleration and increased capital expenditure supporting robust cloud growth expectations. Analyst Brad Reback forecasts high 30% cloud revenue growth for the next two fiscal years, driving accelerating total revenue (projected ~16% FY26, ~20% FY27) and leading to faster earnings growth from 2027 due to management's spending discipline. Oracle shares rose 2% following the upgrade, reflecting investor confidence in the company's growth trajectory.

Analysis

Stifel has upgraded Oracle (ORCL) to Buy from Hold, increasing its price target to $250 from $180, which implies a potential 19% upside from its recent close. The core of this bullish thesis is the sustainability of Oracle's cloud revenue acceleration, which Stifel forecasts will grow in the high 30% range for the next two fiscal years. This cloud momentum is expected to fuel accelerating total company revenue growth, projected at approximately 16% in fiscal year 2026 and 20% in fiscal year 2027, supported by a significant increase in capital expenditures and Remaining Performance Obligation (RPO) gains. While higher capex is anticipated to cause near-term gross-margin compression, the analysis highlights management's proven expense discipline, noting that last year's 8% revenue growth was achieved with only a 2% increase in headcount and a 5% rise in operating expenses. This operational leverage, driven by a strategic focus on physical infrastructure over personnel for new business generation, is expected to result in accelerating earnings growth beginning in 2027.

Key Decisions for Investors

• Given the strong conviction from Stifel and the projected 19% upside to the new $250 price target, investors should view this as a reinforcing signal to evaluate or increase long positions in Oracle, particularly those with a bullish outlook on enterprise cloud infrastructure.
• It is crucial to recognize that the thesis has a multi-year horizon, with expected near-term gross margin compression due to heavy capital spending before accelerated earnings growth materializes starting in 2027.
• Investors should closely monitor Oracle's subsequent quarterly reports for sustained high-30% cloud revenue growth and expanding RPO figures to validate that the increased capital expenditures are translating into the forecasted acceleration.