Key Takeaways
- By Nov. 12, DBS had cut its Oracle price target to $290 from $310 and kept its Buy rating, which leaves 126% upside from the Nov. 11 close.
- Oracle is 48% below its June high after a credit downgrade, negative free cash flow, a scrapped Tencent lease and Microsoft winding down a deal.
- Analysts have raised estimates as the stock fell, so it trades at 15x forward earnings, against a five-year average of 21x.
- DBS’s $290 is 26x fiscal 2028 earnings. A rebound looks reasonable, but $290 within a year needs a re-rating Oracle hasn’t earned yet.
Oracle (ORCL) is 48% below its June high, and DBS still sees 126% upside, even after trimming its target. By Nov. 12, DBS’s Andy Yu had cut his price target to $290 from $310 and kept his Buy rating.
The cut follows early-November reports that Oracle scrapped a Tencent chip lease and that Microsoft (MSFT) is winding down a 2023 deal to rent AI computing from Oracle.
Funding Fears, Then Two Pulled Deals
The bill for the AI build came first. S&P cut Oracle’s credit rating to BBB- in July, and Oracle’s fiscal first-quarter report on Sept. 10 showed free cash flow of negative $5 billion on $28.5 billion of capital spending, and a finished $20 billion stock sale.
The two reports landed two days apart. The Financial Times reported on Nov. 4 that Oracle scrapped the $7 billion Tencent lease after US officials raised concerns. On Nov. 6, Bloomberg reported that Microsoft had spent recent months switching off rented Oracle servers that ran older Nvidia chips.
A Smaller Target, but Still a Big One
DBS’s $290 is 23% above the Street’s average target of $236. Bernstein’s Mark Moerdler sits higher still: he kept his $325 target on Nov. 10, after rerunning his firm’s 10-year forecast on management’s new figures.
Oracle gave a path to positive free cash flow at its Oct. 28 Investor Day, and CFO Hilary Maxson restated it on CNBC on Nov. 10: “We’re fully funded, cash flow positive in the second half of our 28, $30 billion plus free cash flow in 29.” (Oracle’s fiscal years end in May.)
TIKR Tracks 42 Analysts on Oracle. How Many Say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Oracle, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Oracle’s Analyst Ratings
Does $290 Add Up for Oracle?
The Street’s average target fell from $348 a year ago to $236, still 84% above the stock:
Earnings estimates have gone the other way. Analysts expect normalized EPS of $8.15 for the fiscal year ending May 2027 and $11.06 for fiscal 2028, up from $8.05 and $10.90 90 days ago:
Oracle trades at 15x forward earnings as of the Nov. 11 close, against a five-year average of 21x:
DBS’s $290 is a different story. Measure each price against its own year ahead: the $128.38 Nov. 11 close is 16x fiscal 2027’s $8.15, while $290 is 26x fiscal 2028’s $11.06.
Room to Run, Just Not to $290
The big risk is concentration: S&P has said OpenAI accounts for about half of Oracle’s backlog, so much of the plan rests on one private company paying.
Oracle looks cheap to me at 15x, well under its 21x average. But $290 needs the multiple on next year’s earnings to jump from 16x to 26x before free cash flow turns positive, and that’s a lot to ask within a year.
Oracle reports its fiscal second quarter in mid-December. If backlog from customers beyond OpenAI keeps growing, a richer multiple gets easier to defend.
So What Is Oracle Stock Actually Worth?
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Disclaimer:
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