Oracle's stock price has been cut in half since its peak in June. On November 10th, Bernstein maintained its "outperform the market" ( Outperform ) rating, with a target price of $325, which is 159% higher than the current stock price. Bernstein believes that Oracle's data center and database business is a long-term AI winner in the industry, and pointed out two key catalysts: the OpenAI listing, as well as Oracle achieving positive free cash flow in the second half of the fiscal year 2028. Despite the continuous decline in stock prices, analysts have raised their earnings forecasts; Oracle's current projected price-earnings ratio is about 14 times, while its five-year average is 21 times.
This round of selling seems to have gone too far. However, the target price of $325 corresponds to an expected price-earnings ratio of about 38 times, and Oracle is still continuing to raise funds. It will be very difficult to reach this valuation within a year.
Oracle (ORCL)'s stock price has fallen by 50% since its peak in June, but Bernstein has not changed its opinion. On November 10th, analyst Mark Muder maintained a 'outperform the market' rating, with a target price of $325, which is 159% higher than the current stock price.
First facing financing pressures, then encountering negative news
The starting point of the stock price decline was the huge costs incurred by Oracle's AI infrastructure investments. In July, Standard & Poor's downgraded Oracle's credit rating to BBB. In the fiscal quarter ending August 31, capital expenditures reached $28.5 billion, with free cash flow at -$5 billion, and the company also completed a $20 billion stock issuance. On November 2, the company issued new shares and bonds for financing again.
As November begins, negative news keeps coming one after another. According to a report by The Financial Times in the UK, Oracle has canceled a chip leasing agreement with Tencent worth approximately $7 billion. After the Democrats took control of both houses of Congress, the AI infrastructure sector saw a general decline. Bloomberg reported on November 6 that Microsoft has also withdrawn its related orders from Oracle.
Bernstein looks at a ten-year cycle.
"Oracle is the most controversial stock in our coverage," writes Modler. Bernstein recalculated its ten-year forecast based on the latest management guidance and concluded that Oracle's fundamental earnings potential is superior to what the market had previously assumed. The market is concerned that AI will erode the traditional software business, but Modler is optimistic about Oracle's data center and database segments, believing that they will be the winners. He identified two key catalysts: one is OpenAI IPO, which will verify whether the AI laboratory has the ability to continue paying for the contracted computing power; the other is Oracle's return to positive free cash flow in the second half of fiscal year 2028 – a timeline provided by management in October.
Can Oracle support a valuation of $325?
A total of 42 analysts are covering Oracle, with a consensus target price of $236, which still represents an 88% upside from the current price; even so, $325 would represent a further 38% increase from that consensus target price. A year ago, the market's consensus target price was still at $348.
The profit forecast is completely the opposite: Analysts expect that for the fiscal year ending May 2027, the standardized earnings per share ( EPS ) will be $8.15, up from $8.05 expected 90 days ago; for the fiscal year 2028, the forecast is $11.06, compared to $10.90 previously.
That is to say, while the profit expectations have been raised, the stock price has actually become cheaper. Based on the previous closing price, Oracle's expected price-earnings ratio is about 14 times, which is close to the low of 12 times over the past five years and significantly lower than the average of 21 times over the same period.
Bernstein's target price requirement is quite high: it corresponds to a consistent price-earnings ratio of EPS (8.54 USD) over the next 12 months, which is about 38 times. Oracle's highest valuation in five years was 47 times, occurring in September 2025.
There is room for a rebound, but $325 is considered an overly optimistic target.
The risk lies in the balance sheet: After including lease liabilities, the total debt as of August 31 amounted to $169.1 billion, not including the additional financing obtained this month.
I agree that the sell-off this time has indeed been excessive: the valuation is at a low level in the range, and profit forecasts are still being revised upward, so there is room for the stock price to recover. However, to reach $325, the valuation would need to be significantly higher than the historical average; yet the company is still continuously issuing shares and bonds to fund the expansion of its data centers, which is unlikely to be achieved within a year. The second-quarter report in mid-December will reveal whether the company's order backlog is under pressure after Tencent canceled its orders and Microsoft withdrew its orders.
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Responsible Editor: Guo Mingyu
