Oracle Corporation (NYSE:Oracle) is one of the AI puts stocks on the market’s radar. On November 26, Deutsche Bank reiterated their buy rating on the stock with a price target of 5,375.00. The firm is bullish on Oracle, saying it recognizes the risk but also believes the market is not fully appreciating the company’s OpenAI exposure.
Oracle’s share price has recently taken a hit amid concerns over AI capability commitments and capital spending plans, particularly as it relates to OpenAI. So the firm has done an in-depth analysis to gauge Oracle’s potential valuation.
“We use the L/T guidance provided by MGMT at the company’s financial analyst meeting in October and our LT forecast framework (previously described here) to estimate Oracle’s FY30 financials excluding OpenAIA-related revenues and additional capex.”
Deutsche Bank predicted a $4 decline in EPS to $17 and a $10 billion decline in FCF to $31 billion, compared to the company’s guidance. The analysis shows that Oracle is getting little credit for its business with OpenAI “at a current share price of ~200.”
The firm further acknowledged concerns about Oracle’s long-standing lease obligations, which it is responsible for regardless of its assumptions about its AI customers. However, he said “there is a good deal of flexibility/fungibility around these leases.”
Analysts also noted that if it burdened Oracle’s financials with an estimated 50% of the lease costs related to OpenOOpen’s business, “(assuming at least that, at a credible share discount rate) this would mean another ~15bn in EPS and up to ~26bn in FCF.”
Oracle Corporation (NYSE: ORCL ) is a database management and cloud service provider.
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