$553 billion in RPO provides growth visibility, Bank of America resumes coverage of Oracle (ORCL.US) with "buy" rating

Bloomberg Finance APP learns that Bank of America has resumed coverage of IT giant Oracle (ORCL.US) and has given a “Buy” rating with a target price of $200.

Analyst Tal Liani stated, “We are resuming coverage on Oracle with a ‘Buy’ rating and a $200 target price (about 30% upside). This reflects our view of the accelerating demand for AI infrastructure, balanced with the timing, concentration, and capital requirements during Oracle’s transformation process.”

BofA believes, “Oracle has enormous revenue potential in the future, supported by the remaining performance obligations (RPO) of $553 billion related to long-term AI training and cloud infrastructure commitments. This provides solid visibility into significant growth opportunities, but the company still needs to demonstrate its ability to deliver capacity, convert long-term contracts into revenue, and manage the capital-intensive build-out process.”

After in-depth analysis, Liani stated that the three major controversies for Oracle in the coming years include: the timing of converting its current remaining backlog into revenue (57% of the $553 billion RPO is over three years, 22% over five years); customer concentration, especially considering that OpenAI accounts for a large portion of its current remaining performance obligations; and the capital intensity of AI infrastructure build-out, as the company’s spending has reached levels comparable to major cloud service providers.

“We believe the company has solid plans in these areas and is discussing opportunities while also exploring related risks,” Liani added.