Oracle stock rating reiterated at Buy by TD Cowen ahead of Q2 results

Investing.com - TD Cowen has reiterated its Buy rating and $400.00 price target on Oracle (NYSE:ORCL) ahead of the company’s second-quarter earnings report scheduled for December 10.

The research firm expects two key factors to reverse recent negative sentiment surrounding the stock: Oracle Cloud Infrastructure (OCI) growth acceleration and clarification on capital expenditure and financing requirements.

TD Cowen anticipates Q2 will mark the beginning of OCI growth acceleration, with further momentum building in the second half as the Abilene data center comes online, addressing investor concerns about capacity ramp.

The firm believes Oracle management will provide additional details about capital expenditure and financing needs during the earnings call, which TD Cowen suggests may be "less demanding than consensus thought."

Oracle shares are currently trading approximately 15% below pre-first-quarter levels, with TD Cowen viewing current valuations as being at "trough" levels with "ample room for upside" at roughly 11 times calendar year 2029 estimated price-to-earnings ratio.

In other recent news, Oracle is reportedly in discussions with a group of banks, including Vantage, for a $38 billion loan to fund new sites for OpenAI, according to a report from the Financial Times. This financing would facilitate the construction of additional facilities for the artificial intelligence company. Additionally, Deutsche Bank has reiterated its Buy rating on Oracle, emphasizing the potential of Oracle’s AI cloud infrastructure, with a price target of $375.00. Meanwhile, HSBC also maintained its Buy rating on Oracle, setting a price target of $382.00, as the company explores various funding strategies for its cloud infrastructure expansion. On the other hand, DA Davidson lowered its price target on Oracle to $200.00 from $300.00, maintaining a Neutral rating due to concerns about Oracle’s dependency on OpenAI and its remaining performance obligations. Deutsche Bank conducted an analysis of Oracle’s relationship with OpenAI, noting industry concerns about AI capacity commitments and capital expenditure plans. These developments highlight Oracle’s ongoing strategic maneuvers in the AI and cloud infrastructure sectors.

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