With Wall Street's obsession with quarter-to-quarter growth, to the casual observer it only mattered that Oracle missed estimates for its fiscal fourth-quarter earnings results. But for astute investors who have been waiting for a better entry point, get in now!
If you're looking for value, ignore the noise and focus on where Oracle is heading. Others might focus on Oracle's lack of revenue growth but value still remains in the company's position in hardware, middleware, applications and cloud offerings. All told, these shares are an easy bet to reach $45 in the next 12 months. They are currently at $40.60.
Revenue growth will return on improved cloud initiatives. In the meantime, Oracle remains a strong cash-return story -- one that pays a respectable 1.1% dividend yield. Combined with the $45 target, there is potentially 13% upside for smart investors willing to capitalize on others' mistakes.
It's true that rivals Salesforce.com (CRM) and Workday (WDAY) have ushered in a new generation of cloud-based business application software. These services are taking away customers' need for services that brought Oracle to prominence.
But it's not as if CEO Larry Ellison, who's executed dozens of M&A deals over the past two years, has stood by idle.
With recent deals for Responsys (MKTG) and cloud marketing technology specialist BlueKai, Oracle continues to make its own path in enterprise software and cloud-based services. Given the improved IT spending environment, it's only a matter of time before Oracle's growth takes a turn for the better.
What's more, Ellison has been clear about shifting Oracle's focus to newer parts of the company that are seeing stronger growth. Despite the disappointing results, it was encouraging Oracle opted to shift its revenue breakout to highlight its focus on cloud services.