Oracle stock price target raised to $225 from $200 at UBS on growth

UBS raised its Oracle price target to $225, maintaining a Buy rating, citing the company's projected 100% backlog growth to over $275 billion in fiscal year 2026 and strong Q4 results, including 62% growth in Oracle Cloud Infrastructure. Oracle's fiscal year 2026 revenue guidance was raised to over $67 billion, representing approximately 16% year-over-year growth, with analysts from DA Davidson, Cantor Fitzgerald, and Stifel also raising their price targets. While UBS acknowledges potential margin erosion concerns, they believe positive demand signals outweigh these risks, though Morgan Stanley and Oppenheimer remain more cautious due to valuation concerns.

Analysis

UBS has increased its price target for Oracle (ORCL) to $225.00 from $200.00, reiterating a Buy rating, primarily driven by Oracle's projected "extraordinary" 100% backlog growth to over $275 billion by fiscal year 2026, which UBS suggests could surpass Microsoft's backlog dollar growth. This optimism is supported by Oracle's Q4 FY25 performance, where total revenue increased 11% year-over-year in constant currency to $15.9 billion, and Oracle Cloud Infrastructure (OCI) revenue surged 62%, with projections for OCI growth to exceed 70% in FY26. The company demonstrated resilience with an acceleration in overall growth to 11% from 8% in the prior quarter and an 8% rise in license growth. Furthermore, Oracle raised its FY26 revenue guidance to over $67 billion (approximately 16% year-over-year growth, up from 15% previous guidance) and reported a 41% growth in Remaining Performance Obligation (RPO) at the end of FY25, with RPO projected to grow over 100% in FY26, excluding the Stargate initiative. Multiple analysts, including DA Davidson, Cantor Fitzgerald, and Stifel, have also raised their price targets, citing strong guidance and cloud service expansion, with Cantor Fitzgerald noting Infrastructure as a Service (IaaS) revenue is expected to grow more than 70% in fiscal 2026. Despite these strong indicators, and the stock delivering a 27.05% return over the past year trading near its 52-week high of $198.31, InvestingPro analysis indicates the shares are trading above their Fair Value. UBS acknowledges potential margin erosion concerns in FY26, though believes positive demand signals and backlog growth outweigh these risks. Conversely, Morgan Stanley maintains an Equalweight rating and Oppenheimer a Perform rating, both citing valuation concerns amidst the strong growth outlook. Oracle's plan to open 47 additional Multicloud Datacenters over the next 12 months signals aggressive expansion.

Key Decisions for Investors

• Investors should weigh Oracle's significant backlog growth, robust cloud infrastructure expansion, and upwardly revised guidance against existing valuation concerns, highlighted by some analysts and InvestingPro, and potential margin pressures in FY26.
• Consider the stock's current trading level near its 52-week high and its 27.05% year-over-year return when assessing risk-reward, particularly in light of the mixed analyst ratings regarding valuation despite strong operational forecasts.
• Monitor Oracle's ability to successfully convert its substantial backlog into recognized revenue, sustain the high growth trajectory of OCI, and manage margins effectively, especially as it embarks on an aggressive datacenter expansion plan.