TLDR
- Morgan Stanley cut Oracle’s price target by 30% to $213, citing concerns that AI infrastructure buildout will pressure earnings targets
- Oracle’s debt has grown from $71 billion to $105 billion over five years as it transforms into an AI cloud provider
- The company needs an estimated $356 billion in capital expenditures for IT equipment and $185 billion in lease liabilities to build 10GW of AI compute capacity
- Morgan Stanley’s earnings estimates for fiscal 2028 and 2030 fall far below Oracle’s own targets and Wall Street consensus
- Guggenheim maintains a Buy rating with $400 price target, calling Oracle a “decade stock” despite near-term concerns
Morgan Stanley dropped a reality check on Oracle stock Friday, slashing its price target by 30% to $213. The move sent shares sliding in afternoon trading.
Analyst Keith Weiss kept his Hold rating but warned that Oracle’s aggressive AI infrastructure push will eat into earnings more than most investors expect. His new target still suggests 17% upside from current levels.
The concern centers on cash. Oracle plans to build more than 10 gigawatts of AI compute capacity by fiscal 2030. That’s not cheap.
Morgan Stanley estimates Oracle needs $356 billion in capital spending for IT equipment like GPUs. On top of that, finance lease liabilities for data center shells could hit $185 billion.
The company has already loaded up on debt. Over the past five years, Oracle’s debt ballooned from $71 billion to $105 billion. That expansion fueled its transformation into an AI cloud infrastructure player.
Weiss argues credit markets haven’t fully priced in Oracle’s growing leverage. He recommends selling Oracle’s bonds and buying credit default swaps instead.
The analyst’s earnings estimates tell the story. Morgan Stanley projects Oracle will hit $8.51 per share in fiscal 2028 and $10.02 in fiscal 2030.
The Gap Between Expectations and Reality
Those numbers fall well short of Oracle’s own targets of $10.65 and $21.00. They also trail Wall Street consensus estimates of $10.68 and $19.67.
Oracle’s backlog grew by $426 billion over the past four quarters. Total remaining performance obligations now stand at $523 billion.
About 60% of that backlog comes from customers securing AI infrastructure. That’s at least $300 billion, with OpenAI as a key customer.
Different Views on Wall Street
Not everyone shares Morgan Stanley’s caution. Guggenheim analyst John Difucci reaffirmed his Buy rating this week with a $400 price target. That implies 123% upside.
Difucci calls Oracle a “decade stock” that will deliver exponential earnings growth over time. His message to investors: be patient.
Oracle also faces legal headwinds. The company is fighting a lawsuit from investors who participated in its recent $18 billion bond sale.
Wall Street remains largely bullish despite the concerns. Oracle holds a Strong Buy consensus rating based on 24 Buy ratings and eight Hold ratings from 32 analysts.
The average price target sits at $302.41, suggesting 70% upside potential from current levels.
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