One byproduct of the COVID-19 pandemic was the accelerated shift toward digitization and online/cloud-based services. It also created an preference by investors for “large, well-managed, stable, tech companies with strong balance sheets," according to Monness analyst Brian White.
One of these main benefactors is the Oracle Corporation (NYSE:ORCL), which has made a thus-far successful transformation to a cloud-centric business model, and will be reporting its quarterly earnings today after market close.
White was bullish on the large-cap stock, rating it a Buy and assigning a price target of $115. This target currently represents a possible 12-month upside of 29.30%. ORCL closed trading Wednesday at a price of $88.94 per share.
The legacy technology company is expected by White to at least meet Monness’ projections on revenue and earnings per share, with a considerable portion of its strength being driven by cloud services and license support. This success is in due in part to Oracle’s heavy investments in cloud tech, eventually reaching a point at which it now offers “all three layers of the cloud.”
Even after these initiatives, ORCL’s appetite for innovation does not appear to have been satiated. The company has announced plans to expand to three new cloud regions, with another 10 anticipated by this time next year. These plans come at a cost, however, as Oracle has increased its capital expenditures by double their original amount.
Along with other cutting-edge high-tech firms, Oracle has also been taking an interest in blockchain technology. The firm understands the security potential when enterprises need to share data in real time, and is now offering “a cloud service, an on-premises edition, and a SaaS application for supply chain” all using adopted blockchain tech.
Despite his #51 ranking out of more than 7,000 other financial analysts giving advice, White's sentiment on ORCL is not shared by a majority of his peers. On TipRanks, ORCL has an analyst rating consensus of Hold, based on 6 Buy, 13 Hold, and 1 Sell ratings. The average Oracle Corp. price target is $95.47, indicating a potential 12-month upside of 7.32%.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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