Oracle Stock Just Hit a 52-Week Low. Is It Time to Give Up, or a Long-Term Buying Opportunity?
Key Points
Oracle shares have been more than cut in half in less than a year on fears over its huge capex spending.
Investors worry that the company's spending on AI infrastructure isn't guaranteed to pay off soon enough.
The AI industry's future is compelling, even if investors are questioning its initial practicality and marketability.
- 10 stocks we like better than Oracle ›
It's been a tough past few months for Oracle (NYSE: ORCL) shareholders. Very tough. This tech stock is now down 63% from September's peak and deep into new 52-week low territory.
There's no uncertainty as to why, either. Oracle is spending a fortune on artificial intelligence infrastructure, with no guarantee that those investments will pay off in the near or distant future. The company has also laid off roughly 21,000 workers -- about 13% of its workforce -- over the course of the past year. It's not exactly a sign of confidence in its future.
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The sellers, however, have arguably overshot their target.
The analyst community thinks so anyway. The vast majority of this crowd still rates ORCL stock as a strong buy, with a consensus price target of $250.87, which is more than twice this ticker's current price. These analysts are likely optimistic that, even if Oracle is uncomfortably dependent on its $300 billion business relationship with unprofitable OpenAI, the artificial intelligence business it needs will materialize soon enough, one way or another.
In this vein, a Precedence Research outlook suggests the global AI infrastructure market is poised to grow at an average annualized rate of nearly 22% through 2035. That's more than enough opportunity for Oracle, which is still expected to report revenue growth of nearly 33% this fiscal year, before accelerating its top-line growth to 46% next year.
Image source: Getty Images.
This doesn't guarantee ORCL has already hit bottom, and even if it has, there's no assurance any recovery effort will be quick, effective, or consistent. That's just the nature of bargain-hunting high-growth stocks. They aren't entirely predictable.
The risk is typically worth the volatility and potential reward, and in this instance, it's not as if Oracle is an all-or-nothing longshot. The artificial intelligence business is real and here to stay, and this company is positioned to win a significant share of it. The stock's recent weakness is more about the market's mood and perception of AI's early costs, but moods can and do shift fairly quickly.
Should you buy stock in Oracle right now?
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
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