By Emily Dattilo
Shares of Oracle are on track for another record close, and there is reason to believe the rally will continue, Melius Research argued on Monday.
Analysts Ben Reitzes and Jack Adair upgraded shares of the enterprise software company to Buy from Hold. They lifted their target for the price to $210 from $155.
Shares rose 6.2% to $172.02 in afternoon trading, putting them on track for a record high, according to Dow Jones Market Data. The previous closing record was $162.03 on Friday.
“You could say we are late, upgrading a stock that is up 54% year-to-date — but we could be just in the middle of a move,” the team wrote.
“We see close to $8.50 in terms of an EPS run rate within 2 years — and with our biggest worries muted — we find it hard not to put a 25x multiple on a company set to grow faster than Salesforce and Adobe,” they wrote. Those concerns, now assuaged, included worries over margins; remaining performance obligations, a measure of the backlog of work to be done for customers; and free cash flow.
“Given higher backlog, prospects for ongoing AI success, and cloud revenue acceleration, we are raising estimates,” the analysts wrote.
Last week, the company posted better-than-expected results and announced a partnership with Amazon Web Services. Though the analysts don’t anticipate every quarter being as strong, they argue that the stock should gain over the long term as revenue growth speeds up.
Write to Emily Dattilo at emily.dattilo@dowjones.com