Oracle Corp.’s stock found a new fan Monday as Evercore ISI’s Kirk Materne cheered a “more interesting entry point” in the shares, which have fallen 13% since the company last posted earnings.
Materne upgraded Oracle’s stock
to outperform from in line Monday, writing that the company is “now in a better position to deliver more consistent revenue and earnings growth due a higher [percentage] if revenue coming from its cloud solutions.”
He said that he expects that there will continue to be discussion over “lumpiness” in the Oracle Cloud Infrastructure and Cerner businesses, but he still sees reasons to be upbeat. For one, the OCI business looks like a “huge call option.”
“In our view, the OCI story got a little ahead of itself this spring, but the long-term potential provides upside optionality to both our estimates and the valuation,” he wrote. The growth trajectory of this part of the business is somewhat of a “guessing game” according to Materne, but he wrote that he thinks his forecast for a 50% compound annual growth rate through fiscal 2026 looks reasonable.
Overall, he says, “the math is working in Oracle’s favor” as far as sparking more consistent top-line trends. The company’s growing mix of cloud revenue “gives us confidence that Oracle should continue to deliver consistent mid-high single digit revenue growth,” he said.
Materne also said he likes Oracle for its scale. “It gets lost in the mix with all the AI discussion today, but bigger ‘suite’ vendors are winning in this economy,” he said. “And Oracle is the only vendor with a leading position in cloud-based apps, middleware (i.e. database), and infrastructure.”
Oracle shares were up 0.4% in morning trading Monday to a recent $110.43. Materne’s new price target of $135 implies 22% upside from there.