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Oracle: How You Should Value The Stock

2:16 pm ET, 14 Dec 2017

Oracle (NYSE: ORCL) is reporting FY18 second-quarter earnings after the closing bell today.  You may be wondering, how will the stock move post-earnings.

The Finstead research team came up with a conclusion that the performance of Oracle Cloud constitutes more than 50% of Oracle's stock price movement.  

So first, look for Oracle Cloud results, and in particular Software-as-a-Service (SaaS), along with Platform-as-a-Service (PaaS) growth rates. 

On-Premise Software constitutes between 20-30% of the Oracle's stock's performance.  

The consensus among analysts is that Oracle will exceed its overall revenue and EPS targets.  The remaining question is, how fast will PaaS and SaaS bookings and revenue increase year-over-year.   

Oracle's share in the Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) market has increased from 1% in 2012 to 4.5% in 2016. This is primarily because of Oracle's rapid expansion in the cloud market by leveraging its massive existing customer base in the on-premise software market, but also because of acquisitions such as NetSuite.  

However, the Company uses aggressive sales methods to sell cloud over and above on-premise software licensing agreements.  Oracle has been willing to allow its SaaS and PaaS sales to cannibalize upon its legacy on-premise products, adding to the rapid growth of the former. 

The Company's sales teams have been reorganized to focus on SaaS and PaaS selling.  The most recent sales innovation is Universal Cloud Credits so that customers do not need to specify which Oracle cloud products they are going to use.   

To support the rapid expansion in cloud computing, Oracle made significant capital expenditures in setting up data centers between 2012 and 2014. The Company is now benefiting from the investments made so far.  

To ignite the cloud growth further and compete against SAP (NYSE: SAP), Oracle plans acquired NetSuite in 2016, which is a leader in cloud ERP market.

Over the last year, ORCL returned +23.14%. This return is higher than S&P 500 (17.22%), but lower than Technology sector (26.09%) and Application Software industry (24.73%) returns.

Oracle Corporation (ORCL) Stock Guide

Updated at: 5:03 am ET, 13 Jan 2021

Before we start: if you're looking for ORCL stock price, you can quickly find it out by visiting Finny and typing "ORCL quote". If you're looking for a quick scoop on ORCL stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "ORCL". You'll get all this info in one place. Or you can just type "ORCL news" to get the latest stock news.

Looking to buy or sell Oracle Corporation (ORCL)? Interested in getting the full scoop on ORCL, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this ORCL stock guide, we'll address key questions about ORCL, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are ORCL earnings?
2. When is ORCL earnings date?
3. What is ORCL dividend?
4. What is ORCL dividend yield?
5. What is ORCL stock forecast (i.e., prediction)?
6. ORCL buy or sell? What is ORCL Finny Score?
7. What are the reasons to buy ORCL? Why should I buy ORCL stock?
8. What are the reasons to sell ORCL? Why should I sell ORCL stock?
9. What are ORCL key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are ORCL earnings?

ORCL trailing 12-month earnings per share (EPS) is $3.31.

2. When is ORCL earnings date?

ORCL earnings date is March 10, 2021.

3. What is ORCL dividend?

ORCL forward dividend is $0.96.

4. What is ORCL dividend yield?

ORCL forward dividend yield is 1.48%.

Analyst Predictions

5. What is ORCL stock forecast (i.e., prediction)?

Based on ORCL analyst price targets, ORCL stock forecast is $66.86 (for a year from now). That means the average analyst price target for ORCL stock is $66.86. The prediction is based on 36 analyst estimates.

The low price target for ORCL is $56.00, while the high price target is $82.00.

ORCL analyst rating is Buy.


6. ORCL buy or sell? What is ORCL Finny Score?

#{finnyScore:57}Our quantitative analysis shows 4 reasons to buy and 3 reasons to sell ORCL, resulting in Finny Score of 57.

7. What are the reasons to buy ORCL? Why should I buy ORCL stock?

Here are the reasons to buy ORCL stock:

  • Despite a late start, Oracle has made the necessary investments to ensure its application software will thrive in a cloud-based environment, which should lock customers in over the long run.
  • Oracle has made a bevy of savvy acquisitions to expand its vertical-specific software portfolio, applications that we believe boast meaningful switching costs.
  • Oracle has become more flexible in recent years to meet customer needs, including the embrace of less expensive, open-source database solutions and other technologies.
  • Oracle is gaining ground in its cloud business as is evident from its performance, wherein total cloud revenues grew 60% over the prior-year period. Both its software-as-a-service (SaaS) and platform-as-a-service (PaaS) products should grow very strongly over the next few years as enterprises increasingly transition to the cloud.
  • Oracle enjoys a dominant position in the enterprise software and database management system (DBMS) software market. Among infrastructure, DBMS is expected to record strong growth driven by Big Data and digitalization initiatives. We believe that Oracle’s leading position in the DBMS software market will make it the primary beneficiary of this increased spending.
  • Oracle’s strong cash balance enables it to pursue share repurchases and make consistent dividend payments.
  • ORCL forward dividend yield is 1.48%, higher than the industry (0.13%) and sector (0.23%) forward dividend yields. See ORCL forward dividend chart.
  • ORCL PEG ratio (P/E adjusted for growth) is 1.36, which is low compared to its industry peers’ PEG ratios. See ORCL PEG chart.
  • ORCL average analyst rating is Buy. See ORCL analyst rating chart.
  • ORCL cash to debt ratio is 0.54, higher than the average industry (0.19) and sector (0.17) cash to debt ratio. See ORCL cash to debt chart.

8. What are the reasons to sell ORCL? Why should I sell ORCL stock?

Let's look at the reasons to sell ORCL stock (i.e., the bear case):

  • It will be difficult for Oracle to halt the decay of its legacy relational database business as lower-cost, highly effective alternatives flood the market.
  • Oracle's push into public compute and storage could create a drag on cloud margins, and the firm is years behind top players Amazon and Microsoft in terms of capacity and breadth and dept of services.
  • and Workday are investing heavily in building full-featured software platforms spanning multiple use cases to combat Oracle’s.
  • Although Oracle’s growing cloud business is a significant positive, we believe that the business model transition will hurt revenue growth over the next couple of years. The company expects to gain a significant part of its revenues from SaaS compared with legacy on-premise licensing business. However, SaaS revenues will not be recognized upfront as in the case of license business, which will hurt top-line growth in the near term.
  • While the acquisition of Sun Microsystems makes Oracle one of the leading players in the hardware market, we remain concerned about its growth opportunity. We believe that the ongoing transition to cloud will make it difficult for the hardware segment to perform well on a standalone basis. Although engineered systems are expected to drive growth, we believe that lower hardware volumes will continue to hurt top-line growth over the next couple of years.
  • Acquisitions have played an important part in Oracle’s growth trajectory over the years. Being a late entrant in the cloud computing space, the company is trying to build its position through aggressive acquisitions. The company is making significant investment in these acquisitions in order to catch up with Salesforce and IBM.
  • Oracle faces significant competition in most of its operational markets (database, applications, storage, cloud computing) from the likes of Dell-EMC, IBM, Hewlett-Packard, Microsoft, Sybase, SAP,, Workday and Teradata. The trend toward consolidation is increasing competition for the company in most of these markets. To differentiate products here, large vendors are entering into alliances or partnerships to offer integrated and differentiating solutions.
  • Oracle has been embroiled in various legal tangles. In 2016, Oracle faced defeat in two of its most high profile lawsuits. In May 2016, a 10 member jury found no violations of JAVA APIs by Alphabet thus dismissing Oracle’s $9 billion claim.
  • ORCL profitability is declining. The YoY profit margin change was -15.14 percentage points. See ORCL profitability chart.
  • ORCL Price/Book ratio is 24.12, which is high compared to its industry peers’ P/B ratios. See ORCL forward Price/Book ratio chart.
  • ORCL short interest (days to cover the shorts) ratio is 2.66. The stock garners more short interest than the average industry, sector or S&P 500 stock. See ORCL short interest ratio chart.

Key Stats

9. What are ORCL key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for ORCL:

Metrics ORCL
Price $61.81
Average Price Target / Upside $66.86 / 8.17%
Average Analyst Rating Buy
Forward Dividend Yield 1.55%
Industry Software - Infrastructure
Sector Technology
Number of Employees 137,000
Market Cap $185.47B
Forward P/E Ratio 13.16
Price/Book Ratio 4.71
Revenue (TTM) $39.4B
YoY Quarterly Revenue Growth 1.90%
Profit Margin 26.34%

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