Will Oracle (ORCL) Stock be Helped by Cloud Service Expansion?

NEW YORK (TheStreet) --Oracle Corp. (ORCL) announced that it is expanding its cloud platform, a move that would set up the the software company for more direct competition with Amazon.com (AMZN).

"Oracle is the only company on the planet that can deliver a complete, integrated, standards-based suite of services at every layer of the cloud. Those technology advantages enable us to be much more cost-effective than our competitors. Our new Archive Storage service goes head-to-head with Amazon Glacier and it's one-tenth their price," company Chairman Larry Ellison said in a statement announcing the expansion.

Amazon Web Services leads the market in offering customers cloud computing capabilities. Amazon is followed by the Azure service provided by Microsoft (MSFT) and International Business Machines (IBM), FoxBusiness.com reports.

"Oracle is growing really fast. We sold $426 million worth of business in SaaS and PaaS last quarter, a 200% increase over the same quarter last year. That's an industry record, no company has ever sold that much in just one quarter," Ellison said.

Shares of Oracle are up by 0.22% to $41.60 in pre-market trading on Tuesday morning.

Separately, TheStreet Ratings team rates ORACLE CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate ORACLE CORP (ORCL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ORCL's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.92 is very high and demonstrates very strong liquidity.
  • The gross profit margin for ORACLE CORP is currently very high, coming in at 82.79%. Regardless of ORCL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ORCL's net profit margin of 25.75% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ORACLE CORP's earnings per share declined by 22.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ORACLE CORP reported lower earnings of $2.22 versus $2.39 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $2.22).
  • You can view the full analysis from the report here: ORCL Ratings Report

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