Investment banking giant Morgan Stanley (MS) on Friday cut Oracle’s (ORCL) price target by 30% to $213, warning the software giant’s AI infrastructure buildout may pressure earnings per share targets. The call left ORCL shares in the red in afternoon trading.
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Morgan Stanley analyst Keith Weiss stuck with his Hold rating on ORCL, with his new price target implying about 17% upside. Moving in a sharply different direction, Guggenheim analyst John Difucci earlier this week reaffirmed his Buy rating on Oracle’s shares, putting forward a price target of $400 that implies approximately 123% upside potential.
Morgan Stanley Flags Oracle’s Cash Crunch
Defending his rating, Weiss argued that Oracle’s AI push will significantly increase its financing requirements. In addition, the five-star analyst contended that Morgan Stanley’s calculation indicates that, despite the sell-off seen in Oracle’s shares recently, credit markets are still not fully pricing in Oracle’s higher funding and leverage needs.
Weiss’s comment comes as Oracle, in the last five years, has significantly expanded its debt profile from about $71 billion to roughly $105 billion as it seeks to transform into a leading AI cloud infrastructure capacity provider. The software company is currently locked in a court battle with investors who participated in its recent $18 billion bond sale.
Guggenheim Urges Patience on ‘Decade Stock’ Oracle
Meanwhile, the Morgan Stanley analyst recommended dumping Oracle’s benchmark bonds and instead buying credit default swaps (CDS) on its debt. CDS is a contract that acts like insurance on a bond if the issuer defaults.
By contrast, Guggenheim Difucci calls for patience, dubbing ORCL a “decade stock” that will eventually deliver EPS growth at exponential rates.
Is ORCL Stock a Good Investment?
On Wall Street, Oracle’s shares currently enjoy a Strong Buy consensus analyst rating. This is based on 24 Buys and eight Holds issued by 32 analysts over the past three months.
Moreover, the average ORCL price target of $302.41 implies about 70% growth potential.
