'Structural winner in AI': Mizuho expects Oracle's capitalization to grow to $1 trillion

Mizuho expects that demand for AI infrastructure will allow cloud services provider Oracle to increase its capitalization to $1 trillion and recommends buying its shares. The investment bank analyst predicts that the revenue of the technology giant will grow by 27% annually over the next 5 years.

Mizuho analyst Siti Panigrahi said Oracle's success in artificial intelligence could lead it to a $1 trillion capitalization, MarketWatch reports, citing his note. The publication doesn't specify what timeframe it's referring to. So far, Panigrahi has raised his target price on Oracle shares from $245 to $300, suggesting a potential upside of 21% over a 12-month horizon relative to the closing level of trading on Aug. 15.

On Friday, quotes of the company strengthened by 1.4% and reached $248.3, thus its capitalization approached the mark of $700 billion. When reaching the target Mizuho value will be $842 billion. The analyst confirmed the recommendation to buy shares of Oracle (Outperform rating).

Since the beginning of the year, they have risen in price by 49%.

According to analyst Mizuho, Oracle's revenue growth is accelerating and the company will continue to capitalize on its strong position in database and technology solutions that help customers improve efficiency.

"On the cusp of the enterprise AI revolution, we believe with even greater confidence that Oracle is emerging as a structural winner," Panigrahi wrote, referring to the company winning by virtue of long-term, fundamental changes in the industry.

Oracle's main advantage, according to the analyst, is its ability to boost the performance of its servers' AI chips through advanced technology solutions. It allows the company to "deliver AI training in large-scale projects 50% faster and up to 80% cheaper than other hyperscalers." Over time, this will bring Oracle "a disproportionate share of corporate AI budgets," Mizuho believes.

Panigrahi predicts that the cloud provider's revenue will grow at an average annual rate of about 27% over the next five years. Operating profit, he estimates, will grow at about 24% annually.

An important trigger for the stock could be the Analyst Day that Oracle will hold in October, MarketWatch writes. Panigrahi, like other analysts, expects the company to revise upward its fiscal 2029 outlook at the event.

Bernstein analyst Mark Merdler is even more optimistic about the company's prospects. On Aug. 5, he reiterated an Outperform rating for its stock and raised its target price from $269 to $308. "Oracle is in the early stages of a major transition to the cloud, and [its platform] Oracle Cloud Infrastructure is on track to become the fourth largest global hyper-scale provider, with the pace of growth accelerating," the analyst wrote. He cited a $30 billion, multi-year contract with OpenAI as a key driver, which should generate significant revenue for Oracle's cloud division starting in 2028.

According to MarketWatch, of the 43 analysts tracking Oracle's quotes, 28 of them recommend its securities to buy (Buy and Overweight ratings), 14 advise holding them in a portfolio (Hold), and only one advises selling them (Underweight).

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