If You Lack Conviction in This Market, Here’s 1 Stock William Blair Thinks Deserves Your Attention

Among the leading stocks in the artificial intelligence (AI) revolution, Oracle (ORCL) has undoubtedly been an outstanding winner over the past five years. However, looking at ORCL stock's more recent performance over the past year, it's clear to the average observer that sentiment has started to sour on companies operating in the cloud and compute environment. Oracle is no exception, seeing its share price decline by nearly 40% in the past 52 weeks.

Some of that could be profit-taking, considering Oracle is one of the leading stocks over the past five years, surging about 60% over that time frame (inclusive of its most recent decline). Other issues around expected spending activity on compute, and free cash flow/balance sheet concerns for many of Oracle's customers, are factors I see as behind the remaining majority of this sentiment-driven move.

That said, there are some bullish opinions on ORCL stock out there. Recently, William Blair added Oracle to its conviction list. Let's dive into what this may mean for both investors and Oracle stock moving forward. 

AI Infrastructure Buildout Expected to Continue

Analysts at William Blair don't think the spending party is over. Not by a long shot.

In fact, the Wall Street firm suggested that Oracle stands as one of the key beneficiaries of what it sees as a long-term AI infrastructure buildout, putting Oracle near the top of its list of best buying opportunities in the market. That's high praise, considering the slide Oracle stock has been on for the better part of the past year. 

Now, there are some solid reasons why William Blair and others on Wall Street believe this is a stock with plenty of upside potential. For one, data demand and utilization continue to rise. That's a structural trend many market participants think will continue for decades to come. I can't disagree with that logic, and given Oracle's impressive execution on both the top and bottom line — with William Blair specifically calling out the company's accelerating revenue growth — expectations that multiple expansion could take ORCL stock higher remain key to the investment thesis right now. 

Why Bears Continue to Dogpile on Oracle

The flip side of this argument is that, while Oracle's fundamentals appear strong on the surface, any sort of deceleration in revenue or earnings growth could change the story moving forward. 

In fact, the market appears to already be pricing in some level of slowing earnings growth, considering the forward and trailing 12-month price-to-earnings (P/E) ratios for the stock are relatively stable. With that in mind, the questions circling Oracle about what its earnings growth rate will be a year from now (never mind five or 10 years from now) detract from its recent results. 

I think the market is certainly questioning the future prospects for Oracle, and assigning a higher weight to these concerns over the company's recent performance. Indeed, a return on equity of more than 58% and a P/E-to-growth ratio under 1 suggest that this is a very cheap stock right now. 

In my view, William Blair analysts are onto something, but the devil is always in the details — and timing the markets is a very difficult thing to do. For now, with sentiment where it is, ORCL stock is trading at a level that makes sense to me. 

What Does Wall Street Think About ORCL Stock?

Overall, the mean price target for Oracle stock sits at $257.37 per share, implying potential upside of 83% from current levels over the course of the next year to 18 months. That's a very strong implied return, and one that many investors may want to keep an eye on.

Personally, I'd wait to see how the company's forward guidance evolves over time before taking a position. As of right now, the market generally seems more concerned with what has yet to happen than what has already happened. There's a lack of “status quo” investors in the market who think 2027 and 2028 will look like the past few years, and I think that's a fair assessment.

For now, ORCL stock looks like a hold to me, but I do think that growth-at-a-reasonable-price (GARP) investors can certainly take a stab at adding some Oracle shares on the way down, given this stock is trading near 52-week lows as we speak.