Wolfe Research thinks software company Oracle has a strong growth story thanks to the generative AI boom. Analyst Alex Zukin raised his rating on shares to outperform from peer perform. His price target of $130 implies shares rallying 18.3% from where they closed on Friday. “Our entire call is based on increased confidence and conviction that [Oracle Cloud Infrastructure] will become the engine that accelerates top- and bottom-line growth for the company over the next three years,” Zukin wrote in a Sunday note. “Driven by architectural cost advantages, intelligent partnerships, and an early mover advantage in GenAI, we see OCI doubling market share (2% to 5%) by CY25,” said Zukin. Oracle is scheduled to release its earnings reporter Monday after the bell. “The reason we are doing this upgrade before earnings is not because we are making a call on the quarter, but rather we see the potential for a solid 4Q report coupled with AI narrative tailwinds to drive a narrative re-rating from today’s high teens EPS multiple to somewhere closer to the mid-20’s,” he continued. The analyst said Oracle has created a significant second mover “architectural and cost advantage” around its second-generation Oracle Cloud Infrastructure — which its competitors are unable to match. “Current industry cloud optimization tailwinds are here to stay for years, not quarters,” Zukin said. Notably, Oracle’s cloud software has spare GPU, or graphics processing unit, capacity. GPUs are necessary to process AI functions and have seen a surge in demand as more companies engage in AI. Shares were up 3.5% Monday before the bell. The stock has soared more than 34% in 2023. Growth has also been strong over a 12-month period, with shares gaining more than 63%. ORCL YTD mountain ORCL year to date —CNBC’s Michael Bloom contributed to this report.
