The technology industry is poised to keep leading this market from the front, with software firms now looking to carry the torch as they integrate cutting-edge artificial intelligence (AI) into their cloud services. As the old on-premise database model fades, the cloud is taking over, and this shift has been a game changer. Oracle Corporation (ORCL), a major player in the world of database software and cloud solutions, is well-positioned to capitalize on this trend.
Following Oracle’s fiscal Q1 report earlier this week, the stock shot higher after earnings beat expectations. With the stock up more than 14% in just the past five days, will Oracle keep climbing, or is it time for investors to lock in those profits? Let’s find out.
About Oracle Stock
Oracle Corporation (ORCL), founded in 1977, has grown into a tech powerhouse with a market cap of $444.7 billion. Headquartered in Austin, Texas, Oracle specializes in enterprise software and cloud solutions, offering various cloud services, including ERP, HCM, and NetSuite applications.
Known for its Oracle Database and autonomous systems, the company also serves industries with cloud technologies, hardware, and consulting services. Oracle’s innovation and dominance in the IT sector make it a key player in shaping the future of enterprise tech.
Oracle's stock performance has been nothing short of impressive. After a stellar earnings report for Q1 of fiscal 2025, the shares hit a new record high of $173.94 on Sept. 13.
Over the past 52 weeks, shares of the tech giant have rallied 44.9%, with a remarkable 53.7% surge in 2024 alone. This far outpaces the broader S&P 500 Index’s ($SPX) gains over both time frames, as well as the returns of the iShares Expanded Tech-Software Sector ETF (IGV).
In terms of valuation, Oracle is currently priced at 25.59 times forward adjusted earnings, roughly in line with the tech sector median. The forward price/sales ratio of 7.71 is a premium to ORCL’s own historical average valuations, but isn’t particularly unreasonable compared to most other mega-cap enterprise software companies.
And as Oracle dives headfirst into AI, the premium price could be worth it. With its solid footing in enterprise software and a booming cloud business, the higher-than-average valuation could be a smart bet on future growth. So, while Oracle's shares might seem pricey, they are fueled by the promise of tech innovation and expanding horizons.
The tech giant continues to treat its investors well - not just with cloud innovation, but with steady dividends, too. Alongside its earnings report on Sept. 9, ORCL announced a quarterly dividend of $0.40 per share, payable on Oct. 24, bringing the annual payout to $1.60 per share.
Offering a 1.02% dividend yield and backed by nearly a decade of dividend growth, Oracle keeps dividends rising while maintaining a modest payout ratio of 34.84%, leaving room for future increases and continued expansion.
Oracle Hits Record Highs On Solid Q1 Results
Oracle delivered standout Q1 earnings results after the close on Sept. 9, and the stock surged 11% in the next day’s trading. While revenue climbed 7% year over year to $13.3 billion, edging past estimates, non-GAAP EPS soared 17% to $1.39, easily outpacing expectations.
Oracle’s cloud services revenue jumped 21% to $5.6 billion, fueled by big gains in cloud infrastructure and applications. A solid $2.2 billion came from computing and storage rentals alone, with AI demand propelling growth in its cloud sector. Its remaining performance obligation, which reflects booked sales, hit an impressive $99 billion.
As of Aug. 31, Oracle’s financial cushion grew even stronger, with $10.9 billion in cash and marketable securities, up from $10.5 billion in the year-ago quarter. The company’s ability to generate cash was just as impressive, with operating cash flow hitting $19.12 billion and free cash flow at $11.27 billion.
Oracle continues to expand its cloud dominance, striking a major partnership with Amazon Web Services (AWS). This collaboration, known as Oracle Database@AWS, enhances Oracle's multi-cloud capabilities, allowing customers to run Oracle’s database services on Amazon’s (AMZN) AWS infrastructure. The move, which complements Oracle’s ties with Microsoft (MSFT) and Google (GOOGL) (GOOG), will improve performance and integration for users. With its cloud infrastructure expanding and strategic partnerships solidifying, Oracle is positioning itself as a key player in the competitive cloud market.
For fiscal Q2, Oracle expects total revenues to rise between 8% and 10%, with its cloud business driving growth. Cloud revenue is projected to soar between 24% and 26%, as infrastructure services are set to surpass 50% growth next year. Adjusted EPS is expected to range between $1.45 and $1.49.
Analysts tracking Oracle predict the company’s profit at $5.03 per share for fiscal 2025, up 8.9% year over year, with forecasts calling for a 13.7% rise to $5.72 in fiscal 2026.
What Do Analysts Expect for Oracle Stock?
After Oracle’s stellar Q1 earnings, multiple brokerage firms adjusted their price targets on the cloud provider. JMP Securities upgraded the stock to “Outperform” from “Market Perform,” while analysts at Barclays, Bank of America, Bernstein, Jefferies, Piper Sandler, KeyBanc, Morgan Stanley, JPMorgan, and more all raised their price targets.
Joseph Bonner of Argus raised the price target to $176 from $159, while keeping a “Buy” rating. The firm also boosted its fiscal 2025 EPS estimate by 7 cents to $6.29.
Mizuho also raised its price target to $185 from $170, representing a new Street-high forecast, and backed an “Outperform” rating.
Overall, ORCL has a consensus rating of “Moderate Buy.” Out of 29 analysts in coverage, 18 rate the software stock as a “Strong Buy,” and 11 recommend a “Hold.” The stock currently trades at a premium to the mean price target of $157.08, while Mizuho’s new target is 14.2% overhead.
While Oracle looks like a solid long-term pick for AI-fueled upside, investors may want to wait for a pullback to start accumulating shares, as the stock's 14-day Relative Strength Index (RSI) of 78 suggests that ORCL may be overbought at current levels.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
