Oracle stock forecast: A safe tech stock pick?
Founded in 1977, Silicon Valley start-up Oracle Corporation (ORCL) has evolved into one of the most recognised brands in the computer software sector. According to CompaniesMarketCap, Oracle is the world’s fourth largest software company by market capitalisation, behind Apple, Microsoft and Alphabet.
Oracle Cloud has its business spread across 37 geographic regions, with planned operations in seven new regions in 2022. As of 23 May 2022, Oracle was ranked 91 on the Fortune 500 list.
Through its four primary business segments: cloud, licence, hardware and services, the company offers its cloud-engineering and database management systems to a diverse range of industries. Oracle has over 400,000 customers, and serves large organisations such as Toyota (TM), Siemens (SIE), FedEx (FDX) and Spotify (SPOT).
On 20 December 2021, Oracle announced plans to acquire Cerner, a digital information systems provider for the healthcare sector, for approximately $28.3bn in an all-cash transaction. It was considered one of the biggest-ever deals for Oracle. However, it wasn’t received well by investors, who were swapping growth stocks for value stocks at the time. From a high of $103.65 on 15 December 2021, the stock fell over 10% to $91.64 on 20 December.
The year so far hasn’t been smooth for high-growth tech stocks, which heavily rely on future cash flows for valuation. Headwinds have come in the form of global supply chain issues, the Russia-Ukraine conflict and peaking inflation worldwide.
The ORCL stock price has plummeted over 20%, year to date (YTD). Opening the year at $87.90 on 3 January 2022, the price was $70.75 at the time of writing on 27 June, approximately 19.5% lower. However, the company’s Q4 fiscal 2022 financial results released on 13 June provided a boost in its stock performance.
In this article we undertake an Oracle stock forecast, catch up on latest company news and get analysts’ comments on Oracle stock predictions.
Oracle Q4 and full-year fiscal 2022 financial results
In its financial results for the fiscal 2022, Oracle reported quarterly revenues of $11.8bn, a year-over-year (YoY) increase of 5%, compared to $11.2bn from Q4 fiscal 2021. Touted to be the highest organic growth for the company since 2011, Oracle’s top-line grew by 10%, when looked at in constant currency terms.
Growth in revenues were also reported to be 5%; and 7% in constant currency terms. The top-line for fiscal 2021 was reported at $40.4bn. One year later, this grew to $42.4bn. Accelerated technological adoption during the pandemic helped bring it forward, as Oracle found a wider market for its entire suite of services.
Of the four reportable segments, the primary revenue driver remained through its cloud services and licence support business. The company reported quarterly revenues of $7.6bn through this segment, 3% higher from previous year’s $7.3bn. This growth was primarily driven by the growing momentum in its Fusion, NetSuite Autonomous database in addition to its Gen2 OCI business.
From its cloud business, infrastructure as a service (IaaS) plus software as a service (SaaS), the top line stood at $2.5bn. Reflecting a double-digit growth from the same period previous year, these revenues were up by 22%.
Crediting Oracle’s revenue growth to companies aiming for higher efficiencies in an unstable macroeconomic environment, Anurag Rana, a Bloomberg analyst said:
In its Q4 earnings call, Larry Ellison, chairman and chief technology officer at Oracle, mentioned how healthcare and financial services remain the company’s two most important verticals. Through the recent acquisition of Cerner, the company is aiming to build on its capabilities to provide a suite of applications for the healthcare ecosystem, from diagnosis to monitoring to administrative efficiencies.
Through its Oracle Autonomous Database, low-code programming language, the company is looking to integrate pharmaceutical clinical trials systems directly to hospital clinical systems to reduce the turnaround time.
On its Oracle enterprise resource planning (ERP) cloud front, the company has over 30,000 customers with major healthcare providers. In Q4, its ERP and supply chain management (SCM) programmes went live for Cleveland Clinic, U.C. Health. Oracle also managed to close a deal with UnitedHealthcare in Q4, over German software company SAP.
On the financial services front, Oracle continued to hold a strong position with money centre banks with ERP. Oracle finds major users for its Fusion applications for companies including JP Morgan Chase, Bank of America, HSBC and Credit Suisse. The company also has a market for its offerings in Japanese banks of SMBC, Mizuho, TIAA and Desjardins.
Net income for Q4 fell by over 20%, from $4.03bn to $3.19bn. However, its non-generally accepted accounting principles (GAAP) adjusted earning per share (EPS) of $1.54, through significant buybacks of $600m, managed to beat analyst expectation of $1.37.
Safra Catz, CEO of Oracle, remained highly optimistic on the company’s ability to deliver in fiscal year 2023. Banking on the company’s cloud infrastructure business, she said:
For Q1 FY 23, the total revenue guidance was expected to be 20% to 22%, in constant currency terms. The non-GAAP EPS was expected to grow between 6% to 10% and be between $1.09 and $1.13 in constant currency.
Gold-Partner sues Oracle
In recent news, Nigerian company Plexada System Integrators, which was awarded the title of Oracle Partner of the Year – African Operations in 2014, is suing Oracle in the Lagos State High Court.
Oracle has been sued by Plexada System Integrators in Nigeria for alleged breach of contract and failure to pay millions of dollars allegedly owed for assisting with a Lagos State Government IT contract.
Plexada is seeking almost $56 million in denied revenue, damages, and legal costs for work that occurred from 2015 through 2020. The company also wants to be reinstated into Oracle’s Partner Network. Oracle has issued no official comments on this matter, as of the time of writing (27 June).Oracle stock forecasts and analyst insights
Sharing a technical analysis on the Oracle stock forecast, Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory Services, said:
As of 27 June algorithm forecasting service of Wallet Investor’s Oracle stock forecast for 2022 estimated the price to close at $75.097 in December 2022. The Oracle stock forecast for 2025 was anticipated within the range of $106.930 to $107.872 by December 2025.
In a Oracle share price forecast by Tip Ranks, five out of 18 analysts rated ORCL a ‘buy’, 12 suggested to ‘hold’ and one to ‘sell’. The consensus 12-month price target was $87.67, with a potential low of $70 and a high of $115.
With the release of the Q4 financial results on 13 June, several equities analysts updated their price target on the ORCL stock forecast. JP Morgan revised its price target to $82 from the previous $100 but maintained an overweight rating.
On the other hand, Jefferies & Co. increased its price target on ORCL stock price target to $80 from $75 while suggesting a hold rating. Citigroup continued with its neutral stance on Oracle, but increased its price target to $81 from $75.
When looking at ORCL stock price predictions it’s important to keep in mind that analysts’ forecasts could be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
FAQs
Is Oracle a good stock to buy?
Oracle posted strong financial results for Q4 and full year fiscal 2022, with its quarterly revenues reflecting a 5% YoY increase. Primarily driven by the demand for the company’s cloud infrastructure business, a hyper-growth is expected through this channel in the future.
However, whether Oracle stock is a suitable investment depends on your own investment objectives. You should conduct your own research and then make a decision regarding Oracle stock buy, sell or hold. It’s important to reach your own conclusion on a company’s prospects and the likelihood of achieving analysts’ targets. Remember to never invest more money than you can afford to lose. And past performance is no guarantee of success.
Will Oracle stock go up?
As of 27 June, algorithm-based forecasting service of Wallet Investor predicted the ORCL stock was expected to close at $75.097 by December 2022. A 6.209% increase from its last close price of $70.70.
However, these forecasts can be wrong and have been inaccurate in the past. Always do your own due diligence before investing. Remember to never invest money you can’t afford to lose.
Should I invest in Oracle stock?
With strong top-line numbers and consistent profitability, Oracle stock has continued to perform in a shaky macroeconomic environment, making it a relatively safe stock to hold. With its Q4 financial results out, the ORCL stock shot up by over 10% in a single-day jump. Its recent acquisition of Cerner has opened up the healthcare market for diversifying its offerings.
However, whether ORCL stock is a good investment for you or not will depend on your portfolio composition, investment goals and risk profile, among other factors. Different trading strategies will suit different investment goals with short or long-term focus. You should do your own research and never invest money you cannot afford to lose.
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