ORCL: Oracle Stock Plunges as Analyst Warns Of 40% Downside On Cloud Hype

Sep 26 - Oracle ORCL slipped more than 5% Thursday after analysts raised doubts about the company's ambitious cloud projections. Rothschild & Redburn analyst Alex Haissl initiated coverage with a Sell rating and set a $175 price target, implying roughly 40% downside from current levels.

Haissl believes the market is overestimating Oracle's ability to expand its cloud business, particularly the segment tied to artificial intelligence infrastructure. Oracle has outlined a vision where its cloud operations generate as much as $60 billion annually, a figure that would eclipse its current total revenue. The analyst views that target as overly optimistic and cautioned investors against banking on it.

Shares, which recently traded above $308, pulled back to around $291 following the downgrade. Even with AI adoption surging, Haissl argues Oracle's valuation looks stretched. The stock trades at high multiples of projected 2030 earnings and free cash flow, raising questions about whether current enthusiasm is sustainable.

Although chances of a stunning rise are still being discussed by at least a few market observers, the response of Thursday suggests that investors are cautiously considering the potential and the risks in the AI strategy of Oracle.