Oracle stock could hit $400, but it’s still not a top AI infrastructure pick

Jefferies’ senior analyst Brent Thill admits that there “wasn’t any issue” in Oracle’s ORCL fiscal Q1 earnings, but the company isn’t one of his top three AI infrastructure picks.

Oracle posted a better-than-expected Q1 release and guided for $8.1 a share of earnings (adjusted) on at least $90 billion in revenue for 2027 – both ahead of Street estimates.

The tech giant continues to capitalize on explosive demand for artificial intelligence (AI) workloads, yet Oracle shares are down more than 35% from their recent high.

Brent Thill says Oracle could be a $400 stock

In a post-earnings interview with CNBC, Thill touted the firm’s remaining performance obligations (RPO), which rose 46% year over year.

A 120% growth in Oracle’s cloud infrastructure business throws concerns of AI capex and no ROI “right out the window,” he noted.

The Jefferies analyst maintains a Buy rating on ORCL shares – with a bullish $290 price objective indicating potential upside of an exciting 80% from here.

And since management is calling for $20 in earnings power three years out, Thill actually finds it reasonable to expect this AI infrastructure stock to be worth $400 over the long-term.

Why ORCL isn’t his top AI infrastructure pick

Despite Oracle’s impressive momentum, Thill bluntly positioned the company in the “tier 2” group among major cloud infrastructure providers.

Speaking with CNBC, he explicitly ranked three megacap rivals, Microsoft, Amazon, and Alphabet, ahead of Oracle as primary long-term holdings.

According to the Jefferies analyst, these tier-1 giants benefit from stronger balance sheets, vastly superior core business multiples, and deeper market penetration.

Unlike Oracle, which entered the cloud buildout phase with a lower structural valuation multiple, the primary cloud triad possesses pristine financial flexibility to fund ongoing infrastructure builds without spooking debt markets.

In short, while Oracle stock remains a key ecosystem participant, he views the firm’s weaker credit rating due to debt burden and negative free cash flow ($5.4 billion in Q1) as reasons enough to put MSFT, GOOGL, and AMZN ahead of ORCL.

How to play Oracle shares at current levels

Ultimately, Oracle’s latest financial report reinforces its position as one of the elite five mega-scale infrastructure builders powering the modern generative AI era.

The print demonstrated that its “double-digit” growth in legacy software paired with “triple-digit” expansion in cloud infrastructure remains intact.

Though concerns over debt loads and concentration risks involving partners like OpenAI continue to overhang valuation, Brent Thill contends that much of this negativity is already fully priced into the stock.

For tactical investors, ORCL stock offers an intriguing, potentially discounted opportunity, even if tier-1 hyperscalers remain Jefferies' choice for core cloud portfolios.

Note that Oracle also currently pays a dividend yield of 1.31%, which further improves its appeal for the longer-term.