①Deutsche Bank Analyst Brad Zelnick believes that, despite Oracle The market is concerned about excessive debt in the AI plan, but the current bearish view may be a bullish signal; ② He reiterated his "buy" rating on Oracle with a target price of $375, believing that the return on AI investment is reliable and that Oracle is a leader in the deployment of AI cloud infrastructure.
As Oracle develops its massive artificial intelligence... As AI plans to raise funds, the market is increasingly worried about its excessive borrowing, but Deutsche Bank seems to hold a completely opposite view.
In a report to clients, analyst Brad Zelnick stated that the current bearish sentiment surrounding Oracle may actually be a bullish signal, amid investor concerns about high spending and its impact on the company's financial health.
The report states that assuming Oracle's fiscal year 2030 forecast does not include any revenue or expenses from OpenAI, "our research shows that, compared to the company's guidance, earnings per share (EPS) would decrease by $4 to $17 in this scenario, and free cash flow (FCF) would decrease by $10 billion to $31 billion."
"If you factor these figures in today's market value, then at the current share price of around $200, the company is receiving almost no valuation premium due to its business relationship with OpenAI," he added.
Oracle is currently borrowing heavily for its "AI investment race": following the $18 billion financing in the US high-grade bond market in September, the company secured another $18 billion project financing loan in early November to build a data center in New Mexico. Oracle will be a tenant in the park.
According to a report last month, the bank In addition, a separate $38 billion loan portfolio was provided to finance projects developed by hyperscale data center campus provider Vantage Data Centers in Texas and Wisconsin. These projects are part of the artificial intelligence infrastructure plan announced by OpenAI and Oracle in July.
Morgan Stanley It also warned that credit default swaps (CDS), a metric for measuring Oracle’s debt risk, reached their highest level in three years in November, and the situation will only worsen by 2026 if the company cannot alleviate investors’ concerns about a massive AI spending spree.
Zelnick, however, seemed unfazed. He reiterated his "buy" rating on Oracle with a target price of $375. He acknowledged that investor concerns about debt were real, but also pointed out that the debt could have "significant flexibility/substitutability."
He added that if these liabilities ultimately become a financial burden for Oracle, the company's earnings per share could fall to about $15 and free cash flow could fall to about $26 billion.
Zelnick further explained, "Oracle's current share price is based on 2026 earnings per share forecasts, with a price-to-earnings ratio as high as 27 times. This indicates that the market is unwilling to pay a premium for future growth and is more focused on short-term performance."
“ While we recognize the financial and operational risks, we believe these risks outweigh the enormous opportunities that exist, as OpenAI’s business backlog represents a reliable return on investment (ROI), projects are progressing on schedule, and Oracle’s leadership in large-scale deployment of AI cloud infrastructure,” he added.
(Article source: CLS)
