UBS analyst Karl Keirstead has raised his rating on Oracle stock to Buy from Neutral, causing a 3% jump in shares on Tuesday. Keirstead attributes this upgrade to the potential for Oracle's cloud business, specifically focusing on its prospects in artificial intelligence.
The target price for Oracle (ticker: ORCL) has been increased by Keirstead from $120 to $140. As of midday Tuesday, the stock was being traded at $120.37.
According to Keirstead, Oracle has developed an "under-appreciated edge" in terms of graphics processing capacity, which he believes will attract new customers and drive Oracle Cloud usage. He also highlights that constraints on the supply of graphics processors from Nvidia (NVDA) could contribute to a stronger performance from Oracle shares. Keirstead states that Oracle is benefiting from "outsized allocations of Nvidia GPUs relative to its size," potentially giving them a competitive advantage in GPU speed-to-deployment.
Keirstead suggests that Oracle's forecast of 50% growth in its cloud business for the fiscal year ending in May 2024 may be conservative. He raises his own estimate for cloud segment growth to 59% from 52%. Furthermore, he mentions that Oracle's software-as-a-service business appears stable and their database business could benefit from increased cloud migration activity and prove to be an AI beneficiary.
Overall, Keirstead believes that the "AI story still has plenty of time/room to play out."