TD Cowen Reiterates Buy on Oracle, $240 PT

TD Cowen analyst Derrick Wood reiterated a Buy rating and $240 price target on Oracle (NYSE: ORCL).

“Recent Overhangs: Shares are down ~20% since the last print, weighed down by 1) known financing needs (link), incl. the $20b ATM expected to be exercised by year-end; 2) rising component costs & implications for revs/margins/capex; & 3) various news reports on DC build challenges.

Potential Unlocks: We see several paths for overhangs to dissipate, incl.

1) completion of ATM (we look for updates on progress on the call); 2) clarification on AI contract structures (we think ORCL has built in terms that protect margins & pass on higher component costs); & 3) a reiteration of DC builds on track, especially in New Mexico.

Moreover, OpenAI’s newfound momentum at the frontier, incl. bullish data on its new GPT-5.6 & GPT-6 Astra models, alongside inflecting revs in the enterprise (link), bodes well for risk sentiment on ORCL.

Other Data Points: In late Jul, ORCL signed a 10-yr IDIQ contract w/ the DOW (link), amounting to $3.3b for the first 5 yrs & a total potential value of $7.0b.

We think the contract is a mix of renewal & new business.

In early Aug, there were unconfirmed reports of another round of layoffs (link), which could help preserve or improve EPS outlook for the year.

Estimates: We look for ORCL to meet or slightly beat our 1Q ests of 60% cc growth in Total Cloud, incl. OCI growth of 116% cc. This would mark material acceleration vs.

46% and 92%, respectively, last qtr. Behind this is an expected record ~800-900MW of DC capacity coming online, aided by a large step-up in Abilene. We model EPS growth of 19% vs. 24% last qtr.

On FY27, we expect mgmt to reiterate its $90b rev target & potentially slightly lift its $8.05 EPS target.

Net: We remain constructive on ORCL’s risk/reward & think valuations at ~18x CY27E P/E are not reflective of the building AI growth curves.

We think further execution against its growth acceleration targets should be a tailwind for the stock, while ATM progress will be key to short-term positioning.

We think the 10/28 Analyst Day is likely a more material catalyst for shares given we expect updates to its FY30 targets w/ potential added color around MT capex & financing needs.

Maintain Buy, $240 PT (~27x CY27E P/E)”

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