A multiyear business restructuring by Oracle (ORCL) has moved the database software giant solidly into cloud computing, as the debate between bulls and bears continues over what it means for Oracle stock.
Over the last several years, Oracle has transitioned from an antiquated business of on-premises database software licensing and maintenance to a subscription-based software model that taps the benefits of cloud computing.
Faced with growing competition from cloud-based software providers, Oracle launched a costly restructuring several years ago that included multiple acquisitions. This included a $9.3 billion deal in 2016 to buy NetSuite, the cloud-based provider of enterprise resource planning software. In addition, the company also paid $1.2 billion for Aconex in 2017, a cloud-based provider of construction project management services.
The company is growing its cloud business while simultaneously experiencing a slow, steady decline in its traditional database software businesses, including hardware sales.
Oracle Stock Fundamental Analysis
Oracle reported quarterly results on Dec. 10 that matched estimates on revenue and soundly beat Wall Street expectations on the bottom line.
The company reported adjusted earnings of $1.06 per share, above estimates of 98 cents. Revenue of $9.8 billion was in line with expectations and up 2% from the year-ago quarter, for its fiscal second quarter ended Nov. 30.
Oracle’s cloud services and license support group, which produces the majority of revenue, climbed 4% to $7.1 billion. Its cloud licensing and on-premise licensing segment jumped 3% to $1.1 billion.
Analyst Views On Oracle Stock
Following the earnings report, Jefferies analyst Brent Thill raised his price target on Oracle stock to 65 from 55, with a rating of hold.
Morgan Stanley analyst Keith Weiss maintained a price target of 62 with a rating of equal weight.
“Fiscal first-quarter results bounced back nicely from the fourth quarter, highlighted by 9% growth in licensing, strong cloud momentum and managements conviction in a return to growth,” Weiss wrote in a note to clients.
Oppenheimer analyst Brian Schwartz did not set a price target but maintained a rating of perform, meaning the stock is expected to perform in line with the S&P 500 within the next 12-to-18 months.
“Oracle’s execution and overall results in the quarter were improved with cloud and license sales, and margins coming in better than we expected,” Schwartz wrote in a note to clients. “Oracle’s cloud business and margin growth are trending positively and quarterly results overcame a low bar after last quarter’s disappointment.”
Oracle recorded restructuring costs of $443 million in fiscal 2019, $588 million in 2018, and $463 million in 2017. Over the last three years Oracle has also invested about $6 billion each year on research and development.
Its competitors include Amazon (AMZN), Microsoft (MSFT), IBM (IBM), MongoDB (MDB) and others.
Amid a challenging business environment, Oracle has spent heavily on stock buybacks as a way to boost earnings.
Is Oracle Stock A Buy Now?
A technical analysis of Oracle stock is a key component of determining whether it’s worth buying.
The IBD Stock Checkup Tool shows that Oracle has a weak IBD Composite Rating of 92 out of a best-possible 99. The rating means Oracle stock currently outperforms 92% of all stocks in terms of the most important fundamental and technical stock-picking criteria. The best stocks will often rate 98 or 99 at the time they launch a big price run.
It has a Relative Strength Rating of 47. The rating shows how a stock’s price performance over the last 52 weeks holds up against all the other stocks in IBD’s database. Look for stocks with a rating of 80 or higher. The best stocks will often rate over 90 at the time they launch a big price run.
Also, Oracle has an Accumulation/Distribution Rating of B+. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying. The lowest rating of E means heavy selling. Think of the C grade as neutral. The stock is also trading above its 50-day moving average.
Oracle stock is currently teetering on the edge of a buy zone. The stock broke out of a flat base on Dec. 16, after a long consolidation, with a buy point of 62.70. The buy range extends to 65.83.
Stocks To Buy Or Watch
If you want to invest in a large-cap stock, a comprehensive selection of articles is here. Also, the IBD Big Cap 20 index offers a selection of the very best large-cap stocks.
And be sure to read IBD’s after-the-close The Big Picture column each day to make sure growth investors have a green light.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
YOU MAY ALSO LIKE:
IBD Live: A New Tool For Daily Stock Market Analysis
View more information: https://www.investors.com/news/technology/oracle-stock-buy-now/