NEW YORK (TheStreet) -- I'm starting to realize it's like pulling teeth to get Wall Street analysts to say something indiscriminately positive when discussing the prospects of database giant Oracle (ORCL) - Get Report.
Instead, what you often get are a myriad of "yeah, but..." responses. You know, the conviction-lacking type of responses. Those that suggests,
"Yeah, it has great management, but..."
or the ever constant
Those investors continue to get this story wrong.
It seems most investors have already made up their minds and insist Oracle can no longer grow. But the numbers tell another story. What's more, there continues to be this overreaction to its less-than-stellar hardware performance.
But Wall Street is quick to forget Oracle is a software company first. Any ceiling achieved in hardware has more than been offset by its software and services performance.
From that standpoint, a case can be made that the company's true value is far from being reflected in today's prices. I will go a step further and say the stock still has at least 25% more upside from current levels. There shouldn't be any ifs, and or "yeah, buts.." about it.
Granted, the competition is not going away. In addition to the aforementioned Salesforce.com, there is
as well as
International Business Machines
and a host of other players looking to secure their position within the space.
Currently Oracle is being priced as if it should concede the victory to someone else. Don't hold your breath.
The company has gone on a bit of a shopping spree of late to remind Wall Street it has no plans of stepping aside. In response to acquisitions made by Salesforce.com and SAP, which have opened their wallets to names such as
, respectively, Oracle's list of acquisitions include
Taleo, RightNow, Endeca, Vitrue
and most recently
, a social media monitoring firm rumored to have been acquired because of the growing popularity of social media sites such as
Oracle understands the strategic importance of these purchases even though they might have escaped analysts on Wall Street. For that matter, the impressive aspect of these purchases is they span various industries with calculated levels of expertise including data analytics, clinical trial, human resources and even social media.
Clearly, the company plans to leave no stone unturned in its quest for viability and relevance well into the future, and it can do this without changing or altering what it does best. However, performance such as its most recent quarter -- where revenue grew 20% sequentially -- continues to go unnoticed or considered "routine."
In many respects, Oracle suffers from the same lack of appeal as Microsoft and
where performance has to consistently be great just to be accepted as good. In this example, analysts were quick to point out that
"Yeah, 20% sequential growth is good, but hardware sales dropped...
These same analysts have become too quick to ignore Oracle's strong cash position, deep market penetration and its innovative strategies, many of which has catapulted the company to the number 1 database name within the enterprise. What's more, over the next five years the company should be able to produce high single digit revenue growth while demonstrating improving free cash flow margins.
So without question the stock is significantly undervalued today. Interestingly, at $32 per share the stock is up over 25% since hitting a near-term low on May 18 of $25.33. I still see $40 as an achievable target by the end of the year.
while the stock traded at $25 and at the time I heard
. Today at $32, it's time to believe.
At the time of publication, the author held no position in any of the stocks mentioned
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.