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Bernstein is sticking by Oracle as the artificial intelligence buildout creates long-term value for the cloud services and infrastructure company. Analyst Mark Moerdler reiterated his outperform rating and raised his price target to $308 from $269. His new target suggests nearly 22% potential upside for the stock, which has rallied about 51.5% this year. “Oracle is in the early days of a massive Cloud transition, with Oracle Cloud Infrastructure (OCI) on track to become the 4th largest global hyperscaler and growth accelerating,” the analyst wrote in a Tuesday note to clients. “While most of the revenue today is from CPU-centric workloads, with the recent announcement of a mega contract, growth should further accelerate driven by AI, creating a substantial investment opportunity.” ORCL 1Y mountain Oracle stock over the past year. Oracle appears on track to reach its lofty growth goals. The company expects its fiscal 2029 revenue to be above the $104 billion target the company set in September, the company said in its June financial report. Oracle also recently closed a multiyear contract with OpenAI that it thinks will generate more than $30 billion in cloud revenue beginning fiscal year 2028. Given these targets, Moerdler expects Oracle’s revenue and operating margins to increase significantly over the next five to 10 years and driven the stock valuation higher. “We expect Oracle’s growth to accelerate for the next few years; revenue and operating profit growth will accelerate and once growth slows FCF margins will rebound and the value created for investors will be substantial. Looking 5-10 years out Oracle could be many times larger on most factors,” Moerdler said. Moerdler acknowledged, however, that Oracle’s shift to cloud will likely hurt margins in the near term. But “to understand both Oracle’s ability to offset in part or in whole the lower gross margins, one needs to recognize the potential impact of operating leverage. We saw this at Microsoft, and we expect to see this at Oracle. In fact, Oracle has been quite successful in driving sustained operating leverage,” he said.
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