Mizuho reiterates Outperform rating on Oracle stock amid share pullback

Investing.com - Mizuho maintained its Outperform rating and $400.00 price target on Oracle (NYSE:ORCL) stock ahead of the company’s fiscal second-quarter results scheduled for December 10. This target aligns with the highest analyst price objective for Oracle, which currently trades at a P/E ratio of 50.16.

Oracle shares have declined 34% from their September 10 peak of $345.72, compared to a 2% drop in the iShares Expanded Tech-Software Sector ETF (IGV), according to Mizuho’s analysis. Despite this pullback, the stock has shown resilience with an 8.28% gain over the past week, currently trading at $217.58.InvestingPro data shows Oracle appears slightly overvalued compared to its Fair Value, with 16+ additional ProTips available for subscribers.

The firm attributes the pullback to investor concerns about Oracle’s capital expenditure requirements for data center buildout and the company’s ability to finance these investments. These concerns are reflected in Oracle’s financial metrics, with a current ratio of 0.62 and negative free cash flow of $5.88 billion in the last twelve months.

Mizuho expects Oracle to leverage financing structures such as vendor financing and capital leases to reduce upfront capital expenditures and limit the need for additional debt, similar to approaches seen across the artificial intelligence sector.

With Oracle’s earnings just two days away, analysts forecast fiscal 2026 EPS of $6.98 with 17% revenue growth. The research firm anticipates Oracle will deliver "a solid print" in its upcoming earnings report and provide clarity on its data center funding strategy, which Mizuho believes should address recent investor concerns.

In other recent news, Oracle is preparing to release its second-quarter earnings report on December 10, with several analysts maintaining their ratings ahead of the announcement. RBC Capital has reiterated its Sector Perform rating with a $310 price target, while TD Cowen and Deutsche Bank both maintain Buy ratings, with price targets of $400 and $375, respectively. TD Cowen anticipates that growth in Oracle Cloud Infrastructure and clarity on capital expenditures will help reverse negative sentiment. Deutsche Bank highlights opportunities in Oracle’s artificial intelligence cloud infrastructure as a significant factor for their positive outlook.

Additionally, Oracle is reportedly in talks with Vantage and a group of banks for a potential $38 billion loan to fund new sites for OpenAI, indicating a strategic investment in expanding AI capabilities. HSBC also maintains a Buy rating with a $382 price target, noting Oracle’s ongoing exploration of funding strategies for cloud infrastructure expansion. The firm suggests that Oracle could use methods like special purpose vehicles to manage large capital projects. These developments reflect Oracle’s focus on cloud and AI growth, as well as strategic financial planning.

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