Oracle stock is on the rise. The rising Outlook Cloud AI demands another upgrade.

Oracle stock got a boost on Tuesday from Barclays analyst Raimo Lincho, who upgraded its rating to overweight from equal weight, and raised its price target to $150 from $126.

Oracle (trading symbol: ORCL) rose 1.5% to $122.73. The stock is up 49% year-to-date.

Lenschow asserts in a research note that Oracle stock offers “a multi-year opportunity for strong growth at high margins” driven by a positive turnaround in the company’s Oracle Cloud business, as well as growth in the cloud-based version of its enterprise application software. He believes the key to the story is Oracle Cloud, which is being implemented in part by ramping up generative AI workloads.

The analyst writes that the past few years have seen Oracle’s growth rate “pick up,” driven by its shift to the cloud, a development Barron It was first referenced over two years ago in a long story. He believes Oracle Cloud is “well-positioned for AI workloads” due to the company’s close relationship with Nvidia (NVDA).

UBS analyst Carl Kerstead made a similar point last week when he upgraded his own rating on the stock to Buy from Neutral, with a $140 price target.

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Oracle Cloud may never reach the size of Amazon Web Services (AMZN) or Microsoft (MSFT) Azure, Lynshaw writes, but adds that he doesn’t see it as necessary given the company’s small size. “Importantly, Oracle Cloud Infrastructure follows a similar growth trajectory as AWS and Azure when offerings were on a similar scale,” he writes.

At the same time, it also indicates that Oracle is well positioned to continue strength in its SaaS portfolio, primarily driven by its Fusion and NetSuite financial instruments. He believes it can become the “platform of choice” for enterprise resource planning, human capital management and supply chain management. It is believed that these applications are in a positive position against its competitors SAP (SAP) and Workday (WDAY).

Not least, Lynshaw maintains that the stock should continue to move higher, given the “aggressive” valuation of around 20 times estimated earnings per share in 2024. He sees room for “constant reclassification of various things”.

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Write to Eric J. Savitz at eric.savitz@barrons.com

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