This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Misunderstood Oracle May Pleasantly Surprise Investors

In the previous four quarters, Oracle surprised on the upside three times. That's the kind of track record that one might expect from an industry leader that has numerous streams of recurring revenue. Let's look at a five-year chart to get a better picture of how the price has performed and what factors seem to determine the share price's direction. ORCL Chart ORCL data by YCharts

The trailing 12-month revenue-per-share line and year-over-year diluted quarterly EPS growth correlate well with the stock's price performance. If Oracle can't exceed the analyst community's estimated expectations concerning these two metrics, a price pullback wouldn't be surprising.

When Jim Cramer and Stephanie Link added Oracle to the Action Alerts Plus stable of holdings earlier in March, they wrote: "Oracle is the largest enterprise software company, with a 47% market share. It's twice the size of its next two competitors combined.

"It sells a wide range of enterprise products such as databases, middleware, applications and hardware. But it makes its money in higher-margin software license and services, which account for 70% of total revenue. The company has grown through acquisitions, the most recent one being Acme Packet. (We like that deal, as it provides more exposure to the networking and service-provider market.) It has made $40 billion worth of deals since fiscal 2005."

These factors are the main drivers for both revenue and EPS growth. The other key driver is the continuing upgrades and improvements its product-development teams continue to make on its existing product line. For example, one of the best-selling products is its PeopleSoft suite of applications.

On Monday, the company announced its latest version, PeopleSoft 9.2. To its credit, Oracle demonstrates its commitment to continue to invest in PeopleSoft by including more than 1,000 new features, functions and enhancements in PeopleSoft 9.2.

The details and benefits of this best-yet version can be found in the news release. Paco Aubrejuan, senior vice president and general manager of Oracle's PeopleSoft applications, summed up this app upgrade by writing: "With revolutionary innovations in user experience, Oracle's PeopleSoft 9.2 has new features and functionality designed to help users work more efficiently, get their work done quicker, and in a way that's more familiar based on consumer technologies. And, with dramatic improvements in operational cost management, we believe Oracle's PeopleSoft 9.2 is a game-changing release."

This may be one of the reasons that Oppenheimer reiterated its "outperform" rating for Oracle and raised its price target from $37 to $40. The analysts' consensus 1-year price target is slightly above $38 a share. I tend to agree with TheStreet Ratings' outlook for Oracle and am looking for a $40 price target and possibly a little higher.

We'll be listening for clues and future guidance from management on its 5 p.m. ET conference call on Wednesday. Overly cautious guidance going forward might precipitate a temporary share-price correction, and that, my friends, may offer an attractive entry point for those waiting for the price to come to them.

Disclosure: As of the time of publication, the author wasn't long shares of any of the companies mentioned in this article.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ORCL $39.23 -0.15%
AAPL $93.24 -0.41%
FB $117.81 -0.21%
GOOG $701.43 0.82%
TSLA $211.53 -4.96%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs