Oracle Just Hit a New 52-Week Low. Wall Street's Average Target Is Still More Than Double the Stock.
Yahoo Finance ·
Six weeks ago, Oracle ( ORCL -4.21% ) management guided for about $8.05 in non-GAAP (adjusted) earnings per share this fiscal year. As of this writing, the stock trades around $117 -- less than 15 times that figure, after setting a new 52-week low of $114.75 on Friday. A multiple like that is usually reserved for mature software companies whose growth is ending, not for a business that just guided for revenue growth of about 34%. However, the analysts covering the software and cloud computing giant haven't followed the stock's price all the way down. The average price target on Oracle sits at about $248, more than double the current share price of about $117. To be clear, an average price target isn't an investment case, and I wouldn't buy any stock because of one. But a gap this wide is worth understanding. Each side of it is pricing a different answer to the same question: Will Oracle's enormous backlog of AI (artificial intelligence) contracts convert into cash before the cost of building for it damages the company? The selling has been relentless. Oracle shares have fallen about 66% from their high of $345.72, and the pressure traces back to spending.
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