Oracle’s strong fiscal fourth quarter results earned the company a price target boost from analysts at UBS, and investors are on the lookout for which companies could be the next AI darlings.
The cloud giant posted revenue that rose 18% year-over-year in constant currency to $13.84 billion, propelled by demand for its cloud offerings from companies deploying AI.
UBS maintained its Neutral rating and upped its target to $120 from $110, noting the success of Oracle Cloud Infrastructure (OCI).
“Oracle shares (+42% YTD versus +38% YTD for Microsoft) were carried into the 4Q/May print on the back of optimism about the OCI and AI narratives and these key drives delivered,” the analysts wrote. “OCI usage growth accelerated to 112% from 86-88% in the prior two quarters and Oracle said that AI start-ups have committed to $2 billion of OCI consumption.”
AI startups don’t get as much attention as the big fish like Oracle, but they represent investment opportunities in the sector.
ImagineAR, an augmented reality platform provider for sports teams and businesses, saw its stock climb 6.8% Tuesday to $0.032.
Shares of Railtown AI Technologies Inc (CSE:RAIL), which is developing generative AI for software developers, added 2.3% at C$0.22.
Other small-cap companies working with AI include Predictmedix, Looking Glass Labs and ARway.ai (CSE:ARWY, OTCQB:ARWYF).
And regardless of Oracle’s share-price movement, enterprise software will continue to play a major role for AI companies moving forward.
“If the OCI/AI narrative remains strong yet the SaaS segment is mixed and FCF estimates move lower due to rising capex, Oracle shares might still work,” the analysts wrote. “That said, at 37x our revised CY24 FCF estimate and 20x CY24E EPS, we believe valuation isn’t yet compelling.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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