Analysts Slash Oracle’s (ORCL) Price Target After Backlog Linked Mostly to OpenAI

Oracle Corporation (NYSE:ORCL) is one of the AI Stocks Making Headlines on Wall Street. On November 25, DA Davidson lowered its price target on the stock to $200.00 from $300.00 while maintaining a “Neutral” rating. The firm raised concerns on an inflated OpenAI-related backlog and rising credit risks, citing them as key overhangs on shares.

Analysts noted that their concerns rose as soon as they saw that Oracle’s backlog surge was almost entirely driven by OpenAI, despite Oracle initially implying multiple customers behind it.

“We were concerned about ORCL as soon as we realized OpenAI represented the entire increase in Oracle’s backlog, and that has indeed come back to bite ORCL, as shares are now trading at a lower price than before reporting earnings.”

A clearer picture regarding the backlog surge was revealed the next day of Oracle’s reported earnings on 9/9, raising red flags.

“The $300bn was by far OpenAI’s biggest commitment, and made Oracle seem like the winner of a bake-off. With more than a trillion dollars of commitments subsequent to this announcement, OpenAI made it clear it was not a serious counterpart and that Oracle was a pawn in the grand game of fake it ‘til you make it…”

Consequently, the firm is now tracking CDS’s, or rising credit default swaps, as rising costs imply that the market is growing uneasy about Oracle’s debt load tied to a customer whose demand may or may not fully materialize.

“It has been pointed out that Oracle would not have been able to report OpenAI in RPO without a contract, but we believe this misses the point that Sam Altman sees this as a win-win – either he needs $1.4 trillion of compute or he renegotiates on his terms since no-one wants OpenAI to fail.”

Oracle Corporation (NYSE:ORCL) is a database management and cloud service provider.

READ NEXT: 10 AI Stocks in Focus on Wall Street and 10 Hot AI Stocks to Keep on Your Radar

Disclosure: None.