Is Oracle poised for a comeback? After a recent analyst upgrade, Oracle (ORCL) shares jumped over 10%, sparking questions about whether now's the time to buy.
Why the Upgrade?
Oracle ( ORCL ) has been building data centers for OpenAI. Concerns arose that OpenAI, known for burning through cash, might default, leaving Oracle with billions in debt.However, reports indicate that OpenAI is raising up to $100 billion. According to Gil Luria, senior analyst at D.A. Davidson, this capital injection confirms OpenAI’s stability to meet its obligations to Oracle in 2026, making the stock a worthwhile long-term investment.
ORCL's Discounted Shares
Luria suggests Oracle's shares are currently undervalued. The market's "pessimistic" view is treating the OpenAI partnership as a liability, not an asset, according to analysts at D.A. Davidson.At approximately 23x forward earnings, the valuation mainly reflects its legacy software business, effectively offering the cloud business for free. Luria also dismisses the idea of AI replacing Oracle's tools, believing clients will continue paying for them.
Luria upgraded Oracle to "Buy" with a $180 price target, suggesting over 15% upside potential.
Consensus and Potential
D.A. Davidson's rating is actually conservative compared to the broader analyst consensus. Barchart indicates a "Moderate Buy" consensus, with a mean target of approximately $295, hinting at a potential 90% rally in the next year.On February 9, Oracle (ORCL) shares closed more than 10% higher after Gil Luria from D.A. Davidson issued a constructive note in favor of the legacy technology company.
