Bank of America has resumed coverage of IT giant Oracle (ORCL.US) with a "Buy" rating and a $200 price target. Analyst Tal Liani stated, "We are reinstating coverage of Oracle with a 'Buy' rating and a $200 price target, implying approximately 30% upside potential. This reflects our view on the balance between the accelerating demand for AI infrastructure and the timing, concentration, and capital requirements associated with Oracle's ongoing transformation."
Bank of America believes Oracle possesses substantial future revenue potential, supported by a $553 billion remaining performance obligation (RPO) linked to long-term AI training and cloud infrastructure commitments. This provides strong visibility into significant growth opportunities. However, the company must still demonstrate its ability to deliver capacity, convert long-term contracts into revenue, and manage the capital-intensive construction process effectively.
In a deeper analysis, Liani highlighted three key debates for Oracle in the coming years: the timing for converting its current backlog into revenue (57% of the $553 billion RPO extends beyond three years, with 22% beyond five years); the degree of customer concentration, particularly given OpenAI's substantial share of the current RPO; and the capital intensity of AI infrastructure build-out, as the company's expenditures have reached hyperscale cloud provider levels.
"We believe the company has solid plans in these areas and have discussed the opportunities while also addressing the associated risks," Liani added.
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