Scotiabank Lowers Oracle Price Target to $241

Scotiabank analyst Pat Colville lowered the price target on Oracle (NYSE: ORCL) to $241.00 (from $290.00) while maintaining a Sector Outperform rating.

“As we feared management’s F27 capex guidance materially overshot Street expectations and Oracle did not lift its F27 revenue target.

This is weighing on ORCL shares after hours.

Nonetheless, we reiterate our SO rating on Oracle after what we see as a print that shows that the company is in the new centre of gravity of the AI world.

Gross margins in 4Q deteriorated less than we feared even as Oracle Cloud revenue ramped, and operating expenses rose only marginally Q/Q, which allowed Oracle EPS to beat targets and rise a staggering 20% YY.

Oracle stated that it will need another ~$40B in F27 debt and equity to fund its NeoCloud build out, which is slightly below our expectations.

With management’s F27 guidance now laid out, we see this print as a clearing event.

ORCL shares are trading at ~25x NTM earnings, only slightly above the 3-year average, we believe the risk/reward skews to the upside as Oracle executes on its vision.

We like Oracle’s rock solid core software business and it’s positioning in GPU-as-a-service given its creme-de-la-creme technical expertise, capacity to raise massive amounts of capital, and independence from competing with its customers.”

This research note is reproduced verbatim from the issuing firm. Price Target never edits, paraphrases or alters analysts’ words — we only republish them in one place.

This research note is reproduced verbatim from the issuing firm. Price Target never edits, paraphrases or alters analysts’ words — we only republish them in one place.