Oracle's selloff offers a chance to buy an 'upper-echelon' growth stock for cheap, analyst says

By William Gavin

An Oppenheimer analyst turns bullish on Oracle's stock after a selloff that has wiped away more than half the company's value since its September peak

Oracle shares have plummeted over the last several months due to spending concerns.

Oracle shares have been battered as investors worry about the company's debt levels and whether OpenAI will follow through on its commitments, but some analysts now see a buying opportunity.

"The selloff in the shares has brought investor expectations to levels that better reflect the uncertainty and risks of Oracle's transition to a capital-intensive business," Oppenheimer analysts led by Brian Schwartz said in a Wednesday note to clients.

Schwartz upgraded the stock to outperform from perform on Wednesday and set a $185 price target, which implies upside of about 22% from current trading levels.

Oracle's stock (ORCL) has plunged by 56% since it peaked in September. It rose 1.2% on Wednesday.

Schwartz said that his optimism comes partly from a belief that Oracle is "relatively immune" to the fears over artificial-intelligence disruption that have slammed software stocks recently. Investors have been fleeing from names like International Business Machines (IBM) and Datadog (DDOG) in recent weeks.

Schwartz also has high expectations for Oracle's earnings potential. His bull-case forecast sees the company's earnings per share nearly tripling by fiscal 2030. Even in his base-case scenario, EPS could more than double in that span.

"These EPS growth trajectories, even after discounting guidance, put [Oracle] in the upper echelon among large-cap companies for EPS growth," he wrote. "As Oracle demonstrates superior EPS growth, it should catalyze better investor sentiment and trigger greater appreciation for the stock."

The analyst admitted, however, that it "may be early" to take a bullish stance on Oracle, calling it a "show me stock" that necessitates consistent results before investors change their opinions. Concerns over Oracle's need for cash will likely continue to be a hurdle for investors, Schwartz added, which could make his team's call premature.

Read: Oracle is the canary in the coal mine for Big Tech's debt-fueled AI spending spree

Investors have grown worried about whether Oracle can meet its financial targets, many of which relate to a large partnership with OpenAI. Schwartz said that the risk of OpenAI being unable to meet its own obligations is a major reason investors avoid buying Oracle, although he noted that the AI company aims to raise as much as $100 billion from investors.

Read: 4 charts show why massive AI spending has started to weigh on Big Tech

Compared with other so-called AI hyperscalers, such as Microsoft (MSFT) or Google parent Alphabet (GOOGL), Oracle has weaker cash flows and has leaned on debt to fuel its spending plans. The company will need to spend as much as $414 billion on data centers through fiscal 2030, according to Oppenheimer.

Although Oracle in December touted its financial health on a call with investors, the company has put itself in what a D.A. Davidson analyst previously referred to as a "very precarious position." Oracle has amassed around $130 billion in debt and $248 billion in operating-lease commitments to fund its cloud-infrastructure plans.

Earlier this month, Oracle said it plans to raise up to $50 billion this year by issuing stock and debt. That removed a near-term overhang on the stock, but private lenders are hesitating to back its plans, according to Schwartz.

"Financing risk to support the company's transition to a capital-intensive business has pushed Oracle's credit default swaps to the highest levels since the Great Recession," he wrote.

-William Gavin

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02-25-26 1742ET