AI has quickly become the ‘shiny new thing,’ not just in tech but across a wide range of economic and business sectors and applications. AI is changing the ways that we gather, collate, and use data, putting it to work faster and more efficiently. In short, the AI boom is in full swing, and it’s here to stay.
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But the reality of AI brings up a new set of questions – the mundane background of the computing industry, which will be impacted first, and most strongly, by AI. The changes are already underway; we see them clearly in the accompanying boom in data centers and cloud computing.
Covering the rapidly evolving computing landscape for Cantor, analyst Thomas Blakey writes of the situation: “Our discussions with CIOs, CTOs, consultants, systems integrators, and others suggest that the value proposition of infrastructure software will increase, driven by the ongoing secular expansion of AI and GenAI. These trends fuel the need for unified, secure, and highly integrated data systems, observable infrastructure, realtime computing and networking capabilities, and enhanced workflows and collaboration.”
Following this line of thought, Blakey is recommending that investors start buying AI software stocks – and knows which two he would buy first. Using the TipRanks platform, we’ve taken a look at both to get an idea of the broader Wall Street view of them – here are the details, along with Blakey’s comments.
Oracle Corporation (ORCL)
First up is Oracle, one of the world’s software giants. The largest, of course, are the multi-trillion-dollar giants Apple, Microsoft, and Alphabet – but Oracle, with its respectable market cap valuation of $450 billion, ranks fourth. The company was founded in 1977, at the dawn of the personal computing era, and has been a leader in the software industry ever since.
Today, Oracle is best known as a provider of cloud computing services, offering its customers applications and solutions for cloud-based database management, HCM, CRM, EPM, and SCM – a slew of acronyms that are easy to sum up: if it’s a business need, Oracle has a software system to get the job done.
The company’s products are offered through three main divisions, cloud applications, cloud infrastructure, and ISV applications. Services offered through these divisions include developer services, big data and data lake, open-source databases, analytics and BI, networking, storage, and of course AI and machine learning. In addition, Oracle can provide an AI infrastructure to run the larger OCI (Oracle Cloud Infrastructure), bringing advantages in AI training, latency reduction, and overall computing performance. Oracle’s customers can access a cloud-based hub for AI solutions, as well as the latest in generative AI systems.
On the financial side, Oracle’s long record of success has given the company a high bar to clear – while a crowded field has increased the competition that it faces. This was evident in the last set of quarterly results, covering fiscal 2Q25. The company’s top line of $14.1 billion was up 9% year-over-year – but it missed the forecast by $20 million. At the bottom line, the non-GAAP EPS figure of $1.47 was a penny less than expected. While these misses were modest, the stock has fallen by 15% since the December 9 earnings release.
However, for Cantor’s Blakey, Oracle remains a solid choice – for both the near term and the long term. He believes the company has sound prospects for continued growth, and writes of it, “Oracle’s cloud-based business model offers multiple vectors of dynamic growth and margin accretion opportunity (43.4% EBIT margin MRQ), in our view. OCI is being driven by AI and set to accelerate in 2HF25 toward 60%+ growth while cloud database services (CDBS) both on OCI and at Cloud Services (CDBS @ CS), such as Azure and AWS, drive margin-accretive revenues in coming quarters and years. Offsetting AI and CDBS tailwinds NT to revenue and EBIT accretion is NT capex related to said AI likely pressuring GM% early on, which we view as logical and offering LT benefits justifying any NT pressure. Provided Oracle benefits NT and LT from AI and LT OCI accretion benefits, primarily tied to CDBS, in our view, we rate ORCL shares Overweight.”
Along with that Overweight (i.e., Buy) rating, Blakey gives ORCL shares a price target of $214, implying a one-year upside potential of 33%. (To watch Blakey’s track record, click here)
There are 27 recent analyst reviews on record for Oracle, breaking down to 15 Buys, 11 Holds, and 1 Sell for a Moderate Buy consensus rating. The shares are priced at $161.03 and their $192.20 average target price suggests that the stock will gain 19% in the next 12 months. (See ORCL stock forecast)
monday.com (MNDY)
The second stock we’ll look at is monday.com, styled with the lower-case ‘m.’ monday is known for its popular line of cloud-based work management software, developed in-house and marketed as solutions for optimizing the business workflow at all scales. The company offers tools for CRM, marketing activities, project management, system optimization, and sales operations, all cloud-based and customizable. monday.com’s platform lets users connect their people and their processes and creates a transparent workflow in the digital office.
Managing the workflow is a time-consuming task, but to smooth it out, monday.com offers its customers access to sophisticated AI capabilities. By putting AI to work, platform users can speed up their data tasks – sorting, analysis, categorization – allowing for better insights. AI also smooths out communications, creating quick summaries of emails, deriving action plans from schedules and data, and translating international communications. The automation even allows users to simply tell the AI what they want it to do – and the system will generate results. The end result is a viable AI solution to some of the back-office world’s most time-consuming problems.
monday.com was founded in 2012, and while it hasn’t reached the same scale as Oracle – the company has a market cap of $12 billion – it does have a global reach, with offices in such major global hubs as New York, Chicago, Tokyo, Sydney, London, and São Paulo. In all, the company’s platform is in use with more than 225,000 enterprise customers, including such major names as Coca-Cola and Carrefour. More than 2,900 of those customers generate an annual recurring revenue (ARR) greater than $50,000 each, and 1,080 of those customers had an ARR greater than $100,000. The company’s total ARR, as of September 30, 2024, was over $1 billion.
Based on this business, the company saw revenue in 3Q24, the last period reported, of $251 million, up 33% year-over-year and $4.72 million better than had been anticipated. Bottom-line earnings, by non-GAAP measures, came to 85 cents per share, 22 cents ahead of the forecast. The company had $82.4 million in free cash flow, up from $64.9 million in 3Q23.
For Blakey, in his coverage of this stock, there are several key areas pointing toward ongoing success. He says of the firm, “The company is expanding its core platform to include other SKUs (CRM, Dev, and Service, which will GA in January 2025) with customer penetration rates varying but overall, we estimate new product revenue at ~6% of revenue in C24E from near 0% in C22. We believe Service will serve as a catalyst with management guiding new products to ~10% of ARR in C25. Overall, checks on monday.com were positive, with customers citing ease of use as a key factor to continue using and expanding seats on the platform.”
These comments support Blakey’s Overweight (i.e., Buy) rating, while his $292 price target points toward a 20.5% one-year upside potential.
Overall, MNDY shares have a Strong Buy consensus rating, based on 20 recent reviews that include 16 Buys and 4 Holds. The shares are currently trading for $242.05, and their average price target, of $319.12, is even more bullish than the Cantor view – implying a gain of 32% for the year ahead. (See MNDY stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.