In the midst of the recent pullback in technology stocks, Oracle (ORCL) stock continues to outperform, rising close to 10% over the past week, while the S&P 500 index has fallen 1.2%. The stock has soared an impressive 55% year-to-date, a stark contrast to the more modest 16% rise witnessed in the S&P 500 index.
If we cast our gaze further back, Oracle's trajectory becomes even more pronounced, with a staggering 70% surge over the past year, dwarfing the S&P 500's relatively subdued 12% uptick. Investors want to know if that out-performance can continue. The database and cloud giant will report first quarter fiscal 2024 earnings results after the closing bell Monday. The reasons behind Oracle's popularity is due to the growing prospects of the Oracle’s cloud ambitions, namely the Oracle Cloud Infrastructure (OCI), which is the company’s primary cloud offerings.
Now part of the company’s application portfolio and cloud expansion goals, OCI offers corporations various cloud computing services such as storage, networking, compute and databases. The primary target is enterprise customers who wants to move their mission-critical workloads to the cloud. Wall Street has applauded the company’s efforts, including Barclays analyst Raimo Lenschow, who recently upgraded the Oracle to Overweight from Equal-weight, citing a "multi-year growth story.”
Raising his price target to $150 from $126, Lenschow noted to investors, "We see a multi-year opportunity for solid growth at high margins driven by an ongoing positive mix effect of better [software-as-a-service and Oracle Cloud Infrastructure] outweighing the lower growth parts of the business.” Meanwhile, the management’s strategy to shift of Oracle's products into the cloud has helped filed growth in the past several quarters. For the stock to keep rising on Monday, the company will need to deliver a top and bottom line beat, along with strong guidance.
In the three months that ended August, Wall Street expects Oracle to earn $1.14 per share on revenue of $12.46 billion. This compares to the year-ago quarter when earnings came to $1.03 per share on revenue of $11.45 billion. For the full year, ending May 2024, earnings are projected to rise 1.5% year over year to $5.19 per share, while full-year revenue of $50.49 billion would rise 1.1% year over year.
Oracle's execution, namely the company’s software-as-a-service segment which continues to grow at exceptionally high rates, while its cloud infrastructure and the autonomous database revenues grew at an even faster pace, will remain key growth drivers. Meanwhile, the company has also capitalized from strategic partnership with the like of AI-darling Nvidia (NVDA) which relies on Oracle's GPU clusters which boasts not only exceptional performance, but also also arguably the most cost-effective in its category.
This Nvidia partnership has bolstered Oracle’s “cool factor” as investors eagerly sought a slice of the AI pie. As noted, the company’s own execution can not be overstated. In the fourth quarter, Oracle cruised by analysts' revenue and earnings estimates, posting $1.67 in earnings per share on $13.84 billion in revenue, ahead of the anticipated EPS of $1.58 on $13.73 billion in revenue. The strong revenue was driven by a 23% year over year surge in cloud services and license support revenue to $9.4 billion.
The company’s infrastructure growth rate continues to accelerate, coming in at 77% growth in the quarter, with 63% growth for the full year. Just as impressive, Oracle's cash flows, which soared by 80% year over year underscored the strength of the cloud business, asserting itself as a legitimate cloud rival to the likes of Amazon (AMZN) and Microsoft (MSFT). With the stock currently trading at all-time highs, Oracle on Monday must continue demonstrate how it can become a future global cloud leader.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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