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Oracle Stock: 5 Reasons This AI Powerhouse Is a Long-Term Buy

Konskie, Poland - November 10, 2024: Oracle company logo displayed on mobile phone — Stock Editorial Photography

Key Points

  • Oracle's Q1 price pullback is an opportunity to buy because of the long-term growth outlook, cash flow, and capital return. 
  • Oracle had a game-changing F2025, emerging as a critical player in AI.
  • New products cement Oracle's position as the go-to database provider for AI. 
  • Interested in Oracle? Here are five stocks we like better.

Oracle Today

Oracle Co. stock logo
ORCLORCL 90-day performance
Oracle
$177.13 -0.02 (-0.01%)
As of 03:35 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$118.86
$198.31
Dividend Yield
1.13%
P/E Ratio
43.36
Price Target
$177.35

Oracle’s NYSE: ORCL CQ1 2025 price correction is an opportunity for investors because the market is resetting its outlook and not reversing. The market reset is due to the timing of AI’s tremendous impact on Oracle.

Unlike NVIDIA NASDAQ: NVDA, which claims most of the AI glory to date, Oracle’s success lies in the long-term application of AI.

Details from the Q3 report affirm the company’s emergence as a critical player in AI infrastructure, a game-changing event for business and technology investors. Oracle is still a small player in the data center world but a budding hyperscaler on track to produce the fastest data center growth of them all. 

1. Oracle’s Tepid Q3 Results Reveal Increased AI Momentum

Oracle’s Q3 results were tepid relative to MarketBeat’s reported consensus but are still solid, provide value to investors, and internal data reveal Oracle’s increasingly critical position in the AI world. The revenue of $14.13 billion fell short by 180 basis points due to weakness in legacy businesses, but the weakness is offset by the 6.4% annual growth and strength in the segments that count.

Services and Systems Support, the bulk of the business, grew by 10%, while Cloud License and On-Premise contracted by 10%. Within the services segment, total cloud grew by 23%, with strength in both sub-segments. SaaS, the weaker segment, grew by 9% on double-digit gains in its core offerings, while IaaS grew by 49%. 

2. Oracle Guides for Sustained Business Acceleration

The business highlights from Q3 and long-term guidance point to accelerating growth and a potentially cautious outlook. The highlights include $48 billion in new contracts, a 92% sequential increase in business from the major hyperscalers, a 62% increase in the backlog to $130 billion, and a forecast for revenue to growth to accelerate to 15% in F2026 and then 20% in F2027. 

The guidance may be cautious due to the increased demand from hyperscalers, including Amazon NASDAQ: AMZN, Alphabet NASDAQ: GOOGL, and Microsoft NASDAQ: MSFT, deals with significant AI players, including OpenAI and Meta Platforms NASDAQ: META, and the doubling of capacity. 

3. Oracle’s New Product Makes It the Only Place to Train AI Models

Oracle unveiled an innovative new product it calls the Oracle AI Data Platform. It directly links leading AI models, including ChapGPT, Grok, and LLAM, to Oracle’s 23ai database. The service facilitates the training of AI models using private or public data with advanced vectorizing tools.

Vector-based search is vital to AI because it allows machines to analyze complex data sets and order the information numerically in vectors. Vectorizing facilitates similarity searches and, ultimately, comprehension, which is the key to unlocking AI's full potential. 

4. Oracle’s AI Empire Generates Robust Cash Flow

Oracle MarketRank™ Stock Analysis

Overall MarketRank™
90th Percentile
Analyst Rating
Moderate Buy
Upside/Downside
0.1% Upside
Short Interest Level
Healthy
Dividend Strength
Moderate
Environmental Score
-0.93
News Sentiment
1.12mentions of Oracle in the last 14 days
Insider Trading
Selling Shares
Proj. Earnings Growth
12.20%
See Full Analysis

Oracle is spending plenty on AI but insufficient to negatively impact the balance sheet, given the earnings leverage AI provides.

Balance sheet highlights from Q3 include increased cash, current, and total assets partially offset by increased liability.

The net result is a near-doubling of shareholder equity to $17.2 billion and a drastic reduction in debt leverage. 

Leverage is still elevated at 5x, but it is manageable and a significant improvement from the 8x reported at the start of the fiscal year.

The bottom line is that cash flow and dividends are safe, including the 25% increase authorized by the board.

The new payment is worth $2.00 annually, with a yield of about 1.3%. The stock is at $145 and still only 35% of the earnings forecast.

5. Oracle’s Analyst and Institutional Support Is Strong

Oracle’s analysts reset their price targets following the FQ3 release but not their sentiment ratings. The stock is pegged at a Moderate Buy with a bullish bias and comes with a forecast for a 20% upside. The price target reductions are a concern but do little to alter the outlook, with most indicating a consensus or higher price point by year’s end.

Regarding the institutions, their buying activity ramped to a multiyear high in Q1. Buying activity outpacing selling by roughly $4.5 billion or about 1% of the stock, providing strong support for the market. 

Oracle ORCL stock chart

Should You Invest $1,000 in Oracle Right Now?

Before you consider Oracle, you'll want to hear this.

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While Oracle currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

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Thomas Hughes
About The Author

Thomas Hughes

Contributing Author

Technical and Fundamental Analysis

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
NVIDIA (NVDA)
4.8365 of 5 stars
$143.78+0.8%0.03%56.66Moderate Buy$171.66
Microsoft (MSFT)
4.5643 of 5 stars
$470.48-0.5%0.71%37.86Moderate Buy$511.57
Amazon.com (AMZN)
4.7104 of 5 stars
$216.890.0%0.09%39.23Moderate Buy$244.89
Meta Platforms (META)
3.5779 of 5 stars
$700.87+1.0%0.30%29.29Moderate Buy$702.48
Alphabet (GOOGL)
4.1484 of 5 stars
$178.03+1.1%0.47%22.10Moderate Buy$199.75
Oracle (ORCL)
4.5186 of 5 stars
$177.130.0%1.13%43.36Moderate Buy$177.35
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