Crucial point for Oracle investors: wait for rally to continue or take profits

In just one week, the market value of cloud company Oracle has grown by $116 billion, and from the April low quotations have already risen by more than 75%. Traders are buying up the company's shares after the quarterly report, which showed that it has the potential to become the beneficiary of the AI boom. As a result, Oracle stock is now trading at its most overbought level in 25 years, Bloomberg notes and suggests that investors may be wondering if the stock has risen too high.

Oracle shares have soared 75% from their April low, including the best two-day gain since 2001 on June 13-14. В обе торговые сессии бумаги компании стали лучшими в индексе S&P 500, подсчитала Investopedia. The rally began after the publication of Oracle's quarterly report Oracle, which showed that revenue growth related to artificial intelligence was picking up. Investors began buying up securities in hopes that Oracle would transform from a conservative software maker into a trendy cloud player that could capitalize on the hype around AI. As a result, the company's market value rose by $116 billion last week, notes Bloomberg.

The sharp growth of shares caused the growth of their market multiples, the agency writes. The ratio, which shows the ratio of Oracle's price to projected earnings (P/E), reached 31 - the highest level since 2002, it is almost double the company's average for the last decade. As a result, investors in Oracle are at a crossroads: on the one hand, there are more and more signs that the stock has grown too fast and too overheated, and on the other hand, there is a great temptation to continue chasing the rally fueled by inflated expectations of artificial intelligence, according to Bloomberg.

Last week's rapid rally drew the market's attention to how well Oracle is executing its plans, especially in AI, notes Dan Morgan, senior portfolio manager at Synovus Trust. Oracle's capabilities in this area are reminiscent of the way Microsoft has aggressively pursued cloud technology in the past decade or how Nvidia has been ramping up its data center supply business in 2023, he says. «The forecasts may be overly optimistic, but I think Oracle is still in the upswing stage, like a teenager who hasn't reached maturity yet,» the analyst said in a Bloomberg statement. - Perhaps this quarter will be the moment when we all realize how much potential the company has.»

Oracle is very well positioned in AI and demand will remain strong for the foreseeable future, according to Stephen Bursey, head of technology research at HSBC. «AI is the first real growth driver for Oracle in a long time, and it comes after a decade when the market thought the company was incapable of finding new sources of growth,» Bersey emphasized. He noted that investors should change the way they look at Oracle: instead of modest growth of 3-5% per year, it now has the potential for solid double-digit revenue growth. «While the multiple may seem overstated, the growth justifies it, and given the outlook, we still think Oracle stock looks attractive,» Bersi concluded.

On average, analysts surveyed by Bloomberg expect Oracle's revenue growth to be 8.4% in fiscal 2025, to reach 16% in 2026, and to accelerate further by 2027. They also predict that the company's net income will increase by 15% in 2026. Although Oracle's market share in cloud computing is behind market leaders like Amazon, Microsoft and Alphabet, recent results confirm that the company's position in AI is strengthening, Bloomberg notes. Earlier this year, Oracle also entered into an agreement with ChatGTP developer OpenAI to provide computing power.

Oracleshares were falling 1.4 percent in trading Tuesday, and were down nearly 2 percent a day earlier as the Nasdaq 100 index rose 1.4 percent. Still, the company's market value has added more than a quarter since the start of 2025.

None of the analysts following Oracle's stock are advising investors to sell, according to data from MarketWatch. The company has 28 buy recommendations (Buy and Overweight ratings), while the remaining 14 analysts are neutral (Hold). That said, the consensus target price for Oracle's stock is $211.4, which is near its June 16 closing level.