Bernstein Sees Upside Potential in Oracle Stock — Bank Maintains $325 Price Target

Bernstein has reaffirmed its "Outperform" rating on Oracle shares and a $325 price target. In a report published on Tuesday, the investment firm noted that the company's financial outlook is better than expected, based on the results of an updated 10-year financial model.

According to Bernstein analyst Mark Moerdler, Oracle is one of the most debated stocks among the companies he covers. At the same time, it has drawn the highest level of questions and interest from investors. He said the market sees the company's potential but is still trying to determine how realistic the growth outlook is and over what timeframe it could materialize.

Oracle no longer needs additional funding

Bernstein's updated model takes into account recent statements and financial projections made by the company's management. The firm concluded that Oracle will not need to raise additional funding and will reach positive Free Cash Flow in roughly 18 months. After that, Bernstein expects a gradual strengthening of cash flows.

The analyst identified two main factors that could drive growth in the company's shares. The first is OpenAI's initial public offering (IPO), which could bring more clarity to the question of whether OpenAI, and the generative AI industry as a whole, can afford to pay for the computing capacity that companies have already committed to using.

The second key factor is Oracle's return to positive free cash flow, which Bernstein forecasts for the second half of fiscal year 2028.

AI could become one of Oracle's main growth drivers

While investors view the development of artificial intelligence as a potential threat to software companies, Bernstein believes Oracle is one of the most compelling companies positioned to benefit from this trend.

The firm's bullish view rests on two pillars: Oracle's AI data center business and its core database business, which Bernstein also sees as having the potential to benefit from the advancement of artificial intelligence.

According to Moerdler, the upside potential for Oracle shares significantly outweighs the risk of potential losses. In his view, additional disclosures about the company's financial position and business outlook in the coming quarters will give investors more clarity and help support a recovery in the share price.