Oracle $ORCL Stock 23% Upside After Multiple Compression

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•  25 Feb 2026
 

•   AMZN  
   
  -1.94%
•   MSFT  
   
  +0.80%
•   NVDA  
   
  -5.64%
•   ORCL  
   
  -1.39%

$ORCL is trading just above 150 after a 25% year-to-date decline and roughly 13% drawdown over the past twelve months, yet the more relevant data point is that valuation multiples have compressed by more than half since September 2024. The upgrade from Oppenheimer & Co. to outperform with a 185 price target implies approximately 23% upside, but the actionable signal is not the target itself; it is the divergence between deteriorated sentiment and stabilizing structural earnings power.

The December 2024 12% single-session decline marked a regime shift. The market repriced $ORCL from a capital-light software compounder to a capital-intensive infrastructure allocator after capex guidance moved toward $50 billion annually. That repricing erased roughly $70 billion in market cap and reset expectations around free cash flow conversion, especially as quarterly cash burn approached $10 billion during peak buildout. The technical footprint of that event remains visible: elevated volume nodes around the breakdown level and persistent supply in the 165–175 zone. However, since then, downside momentum has decelerated despite continued headline noise around debt issuance and AI spending, suggesting forced sellers have largely cleared.

Fundamentally, the key divergence is between earnings per share trajectory and headline capex optics. In base and optimistic scenarios, EPS is expected to at least double, and potentially triple, by fiscal 2030, driven by cloud revenue acceleration and operating leverage embedded in legacy ERP and financial software franchises. Unlike pure AI beta such as $NVDA or hyperscale cloud peers like $MSFT and $AMZN, $ORCL retains a diversified revenue base where core applications are less exposed to AI-driven commoditization. That mix provides earnings durability even as infrastructure investments expand. The market has been discounting $ORCL as if it were a speculative AI capacity build rather than a hybrid of high-margin software and growing cloud infrastructure.

Flow dynamics also matter. The company’s plan to raise up to $50 billion in debt and equity initially triggered reflexive de-risking, but subsequent sessions, including a 9.6% single-day rebound in February 2025, indicate that incremental capital is being interpreted as growth-enabling rather than distress-driven. Volume expansion on up days relative to down days suggests institutional accumulation near the 140–150 range. The partnership exposure to OpenAI and financing arrangements involving groups such as SoftBank Group mitigate balance sheet strain and distribute risk across counterparties, reducing tail-risk perceptions that dominated the initial selloff.

From a technical perspective, $ORCL is attempting to base above a psychologically important 150 level. The risk/reward for traders hinges on whether price can reclaim and hold the post-breakdown gap area near 165. A sustained move through that supply pocket would imply a failed breakdown and potential transition back to trend. Failure to defend 140 on high volume would reopen downside toward prior structural support. The setup is asymmetric only if earnings revisions stabilize while price remains below long-term average valuation bands.

What sophisticated capital is likely evaluating is not near-term cloud revenue variability but forward return on invested capital once the current data center build cycle matures. If incremental margins on AI-related infrastructure normalize and capex intensity peaks within the next several years, today’s compressed multiple becomes a forward-looking entry into a structurally higher EPS base. If, however, capital intensity remains structurally elevated without proportional revenue scaling, multiple re-expansion will stall.

Headlines focus on debt, cash burn, and AI competition. The more relevant metric is whether $ORCL can convert its infrastructure push into sustained double-digit cloud growth while preserving its historically strong EPS generation profile. With valuation reset by more than 50% since 2024 highs and price still materially below prior momentum peaks, the market is pricing skepticism. For traders, the edge lies in monitoring earnings revision trends, cloud backlog disclosures, and relative strength versus large-cap software. The upgrade narrative is secondary; the multiple compression combined with durable EPS potential is the core divergence.

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