Following a week of general tech selloffs that caused a sector-wide loss of nearly $1 trillion, Oracle Corporation ORCL emerged as a bright spot in the stock market. Its shares jumped nearly 10% on Feb. 9 after a D.A. Davidson analyst upgraded the stock to ‘Buy,’ reigniting investor interest in the software giant.
For those looking to capitalize on this momentum without the concentrated risk of a single stock, gaining exposure through Exchange-Traded Funds (ETFs) offers a diversified way to benefit from Oracle’s upward trajectory.
Before delving into the names and specifics of these ETFs, let us first examine what prompted the D.A. Davidson analyst to upgrade
ORCL and whether the stock truly offers upside potential. We also explain why ETF exposure, rather than direct stock ownership, is recommended. To support this view, we present the following analysis.
Analyst Gil Luria of D.A. Davidson upgraded Oracle, maintaining a $180 price target, based on two core convictions:
1. Market Overreaction Correcting: Luria believes the recent plunge in Oracle’s share price — down roughly 25% over eight sessions — was an overcorrection. He stated that the sentiment toward Oracle’s AI exposure was beginning to stabilize.
2. OpenAI’s Financial Strength as a Key Catalyst: Another key driver of the upgrade is the improved outlook for OpenAI, a major Oracle cloud customer. In this context, Luria estimated that OpenAI already has around $40 billion in cash and could raise another $100 billion in the near term (as cited in Trading View). This funding is critical to financing the data centers Oracle is building for the AI leader. Luria believes the fundraising will serve as a catalyst for the stock’s outperformance.
As Oracle’s forward-looking strategy remains deeply rooted in the generative AI revolution, some analysts, including Luria, express a bullish view on the software giant’s future trajectory, largely based on excerpts from its most recent earnings call transcript:
• Explosive Cloud Infrastructure Growth: Oracle Cloud Infrastructure (“OCI”) revenues grew 66% year over year in the fiscal second quarter, with GPU-related revenues skyrocketing 177%. The company reported handing over nearly 400 megawatts of data center capacity and delivering GPU capacity that is 50% higher than the prior quarter.
• Massive and Diversified Backlog: Another factor supporting a bullish view on the stock is Oracle’s sizable remaining performance obligations (RPO) of $523.3 billion, which rose 433% year over year. This backlog, driven by high-capacity contracts with giants like Meta and NVIDIA, provides a highly visible and stable revenue runway that sets Oracle apart from its peers.
Oracle’s story is complex, involving a planned $50 billion capital raise and significant debt, which could introduce volatility and limit the appeal of a single-stock investment, particularly at the current premium valuation. ORCL trades at a trailing 12-month earnings multiple of 27.57, slightly above the industry average of 27.4. Its long-term debt-to-equity ratio is 328.28, far higher than the sector average of 25.35.
On the same day, Luria upgraded Oracle, Melius Research downgraded the stock to Hold from Buy, citing its significant debt load and questioning its valuation given the expectation of no free cash flow until the 2030s (as cited in Yahoo Finance). This implies that not all analysts maintain a bullish stance on ORCL.
In light of the discussion above, investors may look to the following ETFs with significant ORCL exposure to participate in Oracle’s AI opportunity while reducing company-specific financial and execution risks through diversification.
iShares Expanded Tech-Software Sector ETF IGV
This fund, with net assets worth $7.37 billion, provides exposure to 114 software companies in the technology and communication services sectors. Of these, Oracle holds the fourth spot, with a 7.30% share of the fund.
This fund charges 39 basis points (bps) as fees. It traded at a good volume of 28.98 million shares in the last trading session.
Pacer Data and Digital Revolution ETF TRFK
This fund, with net assets worth $453 million, provides exposure to 87 data and digital revolution companies. Of these, Oracle holds the fifth spot, with a 7.20% share of the fund.
This fund charges 49 bps as fees. It traded at a good volume of 0.09 million shares in the last trading session.
Janus Henderson Transformational Growth ETF JXX
This fund, with net assets worth $33.6 million, provides exposure to 24 companies benefiting from durable trends transforming society, including AI, deglobalization, health care innovation, digitization and migration to the cloud. Of these, Oracle holds the fourth spot, with a 7.50% share of the fund.
This fund charges 57 bps as fees. It traded at a good volume of 0.02 million shares in the last trading session.
First Trust NASDAQ Technology Dividend ETF TDIV
This fund, with net assets worth $3.80 billion, provides exposure to 93 technology and telecommunications companies that pay a regular or common dividend. Of these, Oracle holds the fifth spot, with a 5.04% share of the fund.
This fund charges 50 bps as fees. It traded at a good volume of 0.11 million shares in the last trading session.
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Oracle Corporation (ORCL) : Free Stock Analysis Report
First Trust NASDAQ Technology Dividend ETF (TDIV): ETF Research Reports
iShares Expanded Tech-Software Sector ETF (IGV): ETF Research Reports
Pacer Data and Digital Revolution ETF (TRFK): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).