Oracle Corp Down 38% as Analyst Warns of "Risky Blue Sky" Scenario

Rothschild and Redburn analyst Alex Haissl expects Oracle Corp (ORCL) stock to decline by 38% to $175 due to his "risky blue sky" scenario. He believes the market is overestimating the value of the OpenAI deal and ignoring potential risks, such as Oracle needing to borrow tens of billions to build enough data centers. ORCL is up 70% this year, with a P/E (TTM) 80% higher than the sector median.

Oracle Corp's (ORCL) stock has seen significant volatility following a recent analyst report and the company's involvement in the AI market. Alex Haissl, an analyst at Rothschild and Redburn, has set a $175 price target for Oracle's stock, representing a 38% decline from its current levels. Haissl's "risky blue sky" scenario highlights concerns over overestimated cloud growth and unrealistic revenue goals Key facts: Oracle's stock fell over 5% on September 26 after analyst Alex Haissl set a $175 price target, citing concerns about overestimated cloud growth and unrealistic revenue goals.^[1].

The analyst's assessment comes amid a broader market trend where companies are increasingly investing in AI and cloud infrastructure. Oracle's recent $18 billion bond offering attracted nearly $88 billion in demand, indicating strong investor interest in the company's expansion plans Key facts: Oracle's stock fell over 5% on September 26 after analyst Alex Haissl set a $175 price target, citing concerns about overestimated cloud growth and unrealistic revenue goals.^[1]. However, Haissl's concerns are not isolated; the market's overestimation of the value of the OpenAI deal and potential risks, such as Oracle's need to borrow tens of billions to build data centers, have contributed to the analyst's bearish outlook.

Oracle's stock has been on a strong upward trajectory this year, with a 70% increase and a Price-to-Earnings (TTM) ratio 80% higher than the sector median. Despite the positive performance, Haissl's report underscores the importance of considering potential risks and market dynamics when evaluating Oracle's stock.

Meanwhile, the AI market is experiencing intense competition and investment. OpenAI, a leading AI company, has completed a deal to help employees sell shares at a $500 billion valuation, propelling it past Elon Musk's SpaceX to become the world's largest startup OpenAI valuation soars to $500b, topping Musk’s SpaceX^[2]. This deal coincides with OpenAI's negotiations with Microsoft Corp to convert into a more traditional for-profit company, reflecting the increasing commercialization of AI technologies.

In response to competitive pressures, OpenAI has launched a series of technology products, including open AI models that mimic human reasoning. These developments highlight the rapid pace of innovation and investment in the AI sector, which could impact companies like Oracle that are heavily invested in AI and cloud technologies.

As investors evaluate Oracle's stock, it is crucial to consider both the company's recent performance and the broader market dynamics, including the risks and opportunities presented by the AI market. Haissl's analysis provides a perspective that investors should consider alongside Oracle's strong financial performance and growth prospects.