Move over Nvidia (NASDAQ:NVDA | NVDA Price Prediction), there seems to be a new hot stock in town after Oracle (NYSE:ORCL) pulled the curtain on one of the best and most shocking quarters from a large-cap firm you’ll hear of. It’s not every day that an established large-cap founded many decades ago soars around 35% in a single trading session.
With shares now up 112% in the past six months, questions linger as to whether Oracle, a name that’s not in the Magnificent Seven or even the Nasdaq exchange, is the new AI stock to buy as the AI tailwind shifts away from the chipmakers to the software and infrastructure plays.
The blowout Oracle quarter that made Larry Ellison the richest man in the world
In any case, the latest spike in shares of Oracle has made CEO Larry Ellison the richest man on earth. With shares rising more than 6% on Monday’s session following news that Oracle will provide cloud services for America’s version of TikTok, there seems to be a good chance that Oracle will make even higher highs as it looks to become the next big firm to pass the $1 trillion market cap milestone.
With a Street-high price target of $410 held by Citi’s Tyler Radke (that represents an additional 25% worth of upside from these levels), it feels like it’s just a matter of time before Oracle joins the likes of the Magnificent Seven. Sure, it’ll be hard to top that blowout quarter again, especially after numerous Wall Street analysts got back to the drawing board to raise their expectations following a shockingly high cloud bookings figure.
Analysts have been raising the bar on ORCL stock lately
Either way, a 25% gain from these heights is pretty good, especially as new developments and the continuation of the AI boom continue to add further fuel to one of the market’s most heated tech titans. The big question for Oracle is whether analysts are not bullish enough on the firm as the AI tailwind moves through Oracle’s business. Indeed, if the AI infrastructure contracts and partnerships keep happening, investors shouldn’t be surprised if ORCL stock’s blistering pace continues well into the year’s end.
Though $410 is on the high end for price targets, it’s not the only one at or north of $400 per share. Though such a target seems irrational, especially since shares were going for as low as $223 per share back in early September, I do think it’s a realistic target, one that might even be a bit too conservative considering how explosive cloud infrastructure demand growth has been and the potential for
Still plenty of tailwinds that could propel a move to $400
Undoubtedly, many analysts were caught off guard by the big quarterly blowout. And while $410 per share seems reasonably high, I do think that there’s more potential for an upside surprise as a broader range of firms look to follow the leader by raising the bar on their AI infrastructure spend with the fear that they’ll fall behind in AI if they don’t.
While I do think that “AI bubble” commentary and all the healthy skepticism of the momentum we’ve witnessed across some of the hotter AI stocks is warranted, I’m not so sure ORCL stock is done gaining quite yet. Though I do view ORCL as one of the names at risk of a rapid retreat if there is an AI bubble, and it does finally go bust. Until then, there’s more growth to be had.
Make no mistake, ORCL shares are not cheap at 45.3 times forward price-to-earnings (P/E). But when it comes to the AI boom, I think the P/E multiple doesn’t quite tell the full story. Compared to the potential growth in a bull-case scenario that sees a multitude of AI use cases becoming more profitable, I still see Oracle as modestly priced.
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