Melius Stays Bullish on Oracle (ORCL) as AI Cloud Growth Accelerates

Core Insights - Oracle Corporation is recognized as a trending AI stock, with a price target increase from $270 to $370 by Melius analyst Ben Reitzes, maintaining a Buy rating [1][3] - The anticipated long-term revenue growth for Oracle is primarily driven by a surge in AI inferencing capabilities, leading to an expansion of its valuation multiple [1][3] - Despite the positive outlook, Oracle's free cash flow has turned negative due to heavy capital expenditures, which may impact its financials for a while [2][3] Financial Performance - The new price target reflects a 37% increase, indicating strong confidence in Oracle's revenue growth potential [3] - The expansion of Oracle's valuation multiple by 4 turns is a response to the expected higher growth rates [3] - The negative free cash flow is a concern, but it is not seen as an immediate issue for the company's growth strategy [3] Industry Context - The capital expenditure trends are viewed positively for other companies in the AI sector, such as Nvidia, Broadcom, AMD, and Arista Networks, which have exposure to Oracle [3] - Overall AI cloud trends are expected to benefit major players like Microsoft and Google, indicating a broader positive sentiment in the AI industry [3]