NEW YORK (TheStreet) -- With better-than-expected earnings results from multimedia and cloud software company Adobe Systems (ADBE) , Wall Street is warming to database software giant Oracle (ORCL) , which reports fiscal second-quarter earnings results Wednesday.
On Monday, analyst Keith Weiss of Morgan Stanley raised his rating on Oracle shares to overweight from equal weight, while setting a 12-month price target of $50.
In a research report about Oracle's core business and other growth drivers for the stock, Weiss wrote, "We see a 5% to 7% operating income growth (driven largely from the maintenance base), plus a 3% to 5% reduction in diluted share count, plus a 100 to 150 [basis point] dividend yield driving a 10% to 12% total return profile for ORCL over the next two years, at least in line with the S&P 500."
His comparison to the S&P 500 is interesting.
Although Oracle shares are trading at about $41.11, with a gain of 2.9% Monday, Oracle shares are up 7.45% year to date, compared with the S&P 500's 7.64% gain. The problem, however, is that Oracle's story is one of underperformance, when compared with gains of 21.98% and 24.75% by Adobe and Microsoft, respectively.
Can Oracle's performance improve next year?
Weiss says it can.
His $50 target suggests additional gains of 21.6%. And if Weiss is correct in suggesting that Oracle's price-to-earnings ratio of 17.18 can follow Microsoft, with a P/E of 18.29, there are at least 25% gains to be had in the next 12 to 18 months.
Part of his argument stems from the low expectations he says that the market has for Oracle's business.