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Should you buy Oracle stock now?

Oracle has been performing solidly this year, maintaining a stable position amid fluctuating market conditions. The company has garnered attention with a significant revelation pertaining to its commitment to artificial intelligence (AI), asserting its presence in a sector known for rapid expansion.

Expanding its focus, Oracle is not just concentrating on AI but is also channeling substantial investment into diverse ventures, positioning itself to capture a wide array of growth opportunities.

This strategic diversification suggests that Oracle, one of the prominent tech giants outside of the well-known ‘Magnificent 7’, warrants closer examination for those interested in tech investments.

Oracle Stock and the Impact of the Palantir Collaboration

  • Partnership with Palantir Technologies: Oracle is joining forces with Palantir Technologies, a move anticipated to benefit both companies. The partnership is predicted to bolster demand for Palantir’s cutting-edge AI software by making it accessible through Oracle’s Cloud Infrastructure. Conversely, the rising need for Palantir’s solutions is expected to positively affect Oracle’s Cloud Infrastructure division.
  • Cloud Infrastructure Revenue Growth: Oracle’s Cloud Infrastructure has seen a significant uptick, reporting a 49% increase in revenues in the quarter ending February 29, 2024. The partnership with Palantir is projected to help maintain this substantial growth trajectory.
  • Strategic Investments: Beyond the deal with Palantir, Oracle has unveiled its strategy to earmark $8 billion over the next ten years for the expansion of its cloud and artificial intelligence infrastructure, specifically targeting investment in Japan.
  • Broad Implications for AI Sector: The collaboration between Oracle and Palantir stands as one of several strategic moves in the AI industry that underscores the growing dependence on advanced technology in cloud services. Oracle’s aggressive pursuit in expanding and improving its AI and cloud offerings signals a strong commitment to remaining at the forefront of AI innovation.

Additional Catalysts for Expansion

Oracle’s foray into the AI sector is a noteworthy development, but it’s not the solitary focus for the tech giant.

Another key area Oracle is eyeing is healthcare software. The acquisition of the large healthcare IT provider, Cerner, in 2022 has been a significant move, reinforcing Oracle’s presence in this sector.

As Oracle plans to set up its new corporate headquarters in Nashville, Tennessee, known as a pivotal center for the healthcare industry, speculation around further growth in the sector has increased.

Market analysts, such as those from Oppenheimer, point out that Oracle could see benefits from other growing trends like digital transformation and data management.

Despite the optimistic growth potential and anticipated double-digit earnings increase, Oracle’s valuation in the stock market appears moderate with a forward price-to-earnings ratio around 20.6, which is below some of their tech peers.

This valuation suggests a possibility for a future upward reevaluation of the company’s stock as the market recognizes its growth prospects.

Investment Verdict: A Smart Purchase with Time in Mind

Oracle’s financial projections indicate that its earnings may experience a steady growth rate exceeding 10% in the forthcoming years, with a potential acceleration from the fiscal year ending in May 2026 onward.

The dissipating economic headwinds of today, coupled with an anticipated surge in artificial intelligence and a thriving cloud computing sector, could significantly enhance the company’s performance.

Prospects suggest that should Oracle fulfill its earnings projection of $7.23 per share by fiscal year 2026, and assuming the market awards the stock a forward price-to-earnings ratio of between 25 and 30 times, the share price has the potential to ascend to the $200 mark, starting from its present $116 valuation.

Investors exhibiting patience might find Oracle’s stock to be a worthy addition to their portfolios, given the expected alignment of share price growth with earnings advancements and potential P/E ratio expansion.

Our Raven algorithm predicts Oracle stock price to reach $135.11 in 2025.

Investment analysts covering this equity, including those with existing stakes in similar companies, are likely to offer insights based on comprehensive evaluations and their direct experience in the market.

Original Article Link: InvestorPlace

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