CLSA Initiates Oracle at Hold, $145 PT

CLSA analyst Bhavtosh Vajpayee initiated coverage of Oracle (NYSE: ORCL) with a Hold rating and a $145 price target.

“Oracle has seized the initiative of an epochal technology transition with the rise of AI, making amends for the ground lost in the traditional cloud computing era.

We understand the aspiration but are unwilling to be journeymen in what promises to be a volatile ride.

Oracle’s expansion plans in AI cloud are built on debt – we think up to US$500bn of capital may be needed to meet the goals articulated by management to 2030, of which internal cash generation can furnish only a fifth.

This makes Oracle a uniquely high beta stock for investors. Financial estimates in the foreseeable future are highly dependent on minor variations of input variables, which is discomfiting.

A host of other unknowns linger, including the cost and availability of debt funding, the extent of liabilities that come on the balance sheet as well as competitive jostling with established rivals in the field.

All in, we rate the stock a Hold, with a target price of US$145 based on 18x FY2028CL GAAP EPS.

That multiple is a 20% premium to our assumptions for the rest of enterprise SAAS, a directional nod to the scale of Oracle’s ambition.”

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