Artificial intelligence (AI) is gaining significant momentum and is projected to contribute $15.7 trillion to the global economy by 2030. Stocks of companies involved in AI, such as Nvidia, Microsoft, Google, and Amazon, have seen significant gains. Investors seeking exposure to the AI sector are now looking for companies that are not yet in the spotlight but are making progress in the AI space. One such company is Oracle, a cloud services provider.
Oracle, founded in 1977, specializes in enterprise software, cloud computing systems, and computer hardware. The company’s offerings include software licenses, cloud services, and hardware sales. With a market capitalization of $342.24 billion, Oracle’s stock price has increased by about 18.2% this year and offers a 1.3% dividend yield.
Oracle has a history of stable profits, with revenue and earnings growing steadily over the past five years. In its most recent fiscal third quarter, the company reported a 7% increase in revenue to $13.3 billion, driven by growth in its core cloud services and licensing support business. Earnings per share (EPS) rose 16% to $1.41, beating expectations. The company’s free cash flow remained healthy, and its remaining performance obligations increased by 29% year-over-year to $80 billion.
Oracle’s stock is valued cheaper than many of its industry peers, trading at a forward price/earnings multiple of 22.29 and a forward price/cash flow of 18.13.
Recent gains in Oracle’s stock can be attributed to landing a $10 billion cloud contract with xAI, an AI startup led by Elon Musk. The company also formed a partnership with data analytics company Palantir to offer AI solutions. Oracle’s co-founder Larry Ellison highlighted the company’s collaboration with AI technology companies, emphasizing faster and more cost-effective AI model training.
Oracle is innovating in AI by training models directly on customer data within its infrastructure, enhancing privacy, security, and accuracy. The company has integrated generative AI capabilities into its Fusion Cloud Applications Suite, securing new AI contracts worth $1 billion.
Analysts are bullish on Oracle stock, with an average rating of “Moderate Buy” and an average price target of $136.39, indicating upside potential of 9.5% from current levels. Of the analysts covering the stock, 17 have a “Strong Buy” rating, and 12 have a “Hold” rating.
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