Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Software giant Oracle (ORCL) reported better-than-expected profits in the third quarter, but revenue fell short of analysts’ expectations. The company signed several large cloud infrastructure deals during the third quarter and expects to sign more in the coming quarters. We expect ORCL to end fiscal 2024 on a strong note, but should investors consider buying the stock after the earnings call? Continue reading.
Oracle Corporation (ORCL) reported its third quarter results on March 11th. The company comfortably beat consensus EPS estimates, but revenue fell short of Wall Street expectations. In this article, we explained why it’s smart to buy the stock now, even though it missed consensus earnings estimates.
ORCL’s EPS for the third quarter beat consensus estimates by 2.4%, but revenue was slightly below analyst estimates. The company continued its stellar earnings history, beating consensus EPS estimates in each of his subsequent four quarters. Remaining performance obligations, representing recorded revenue, increased 29% to $80 billion in the third quarter.
ORCL CEO Safra Catz said, “New large-scale cloud infrastructure agreements signed in the third quarter increased Oracle’s total remaining performance obligations by 29% to more than $80 billion, an all-time record. ”. ORCL’s cloud revenue exceeds traditional software license revenue for the first time.
“Even though we are opening new cloud data centers and expanding existing cloud data centers at a very rapid pace, demand for our second-generation AI infrastructure significantly exceeds supply. , we expect to continue winning large contracts to reserve capacity for our cloud infrastructure,” he added.
The CEO also said that the company currently expects 43% of its $80 billion remaining performance obligation to be recognized as revenue in the next four quarters, and that the company’s Gen2 cloud infrastructure business remains in a hyper-growth phase for the foreseeable future. He said that there is. “During the third quarter, Oracle completed the migration of the majority of Cerner customers to Oracle’s Gen2 cloud infrastructure,” said Larry Ellison, chairman and chief technology officer of ORCL.
“In the fourth quarter, Oracle will begin offering an all-new suite of ambulatory care cloud applications to these same customers. This new AI-driven system features an integrated voice interface, called the Clinical Digital Assistant, that automatically generate notes and update your electronic health record, saving you valuable time and improving the accuracy of your health data.”
Ellison believes this innovative new healthcare technology offering will enable customers to rapidly modernize their health systems over the next year, transforming Cerner and Oracle Health into high-growth businesses for years to come. I added.
For its fiscal fourth quarter, ORCL expects non-GAAP earnings to be between $1.62 and $1.66, with total revenue including Cerner expected to increase 4% to 6%. As more capacity comes online, ORCL expects total cloud revenue excluding Cerner to increase 22% to 24%.
William Blair analysts upgraded ORCL to “.”excellentThey said, “Positive demand narratives and solid booking growth support Oracle’s structural changes, and the company is well-positioned to sustainably accelerate revenue growth.” Ta.
ORCL stock last traded at $125.52, up 21.9% over the past three months and 47.8% over the past year.
Here’s what could impact ORCL’s performance in the coming months:
strong financials
ORCL’s total revenue for the fiscal third quarter ended February 29, 2024 increased 7.1% year over year to $13.28 billion. Non-GAAP operating income increased 11.7% year over year to $5.79 billion. The company’s non-GAAP net income increased 17.7% year over year to $3.98 billion. Additionally, non-GAAP EPS was $1.41, an increase of 15.6% year over year.
favorable analyst forecasts
Analysts expect ORCL’s fiscal 2024 EPS and revenue to increase 9.1% and 6.6% year over year to $5.59 billion and $53.27 billion, respectively. Fiscal 2025 EPS and sales are expected to be $6.23 billion and $57.85 billion, respectively, up 11.6% and 8.6% year over year.
High profitability
Regarding the most recent 12 months gross profit margin, ORCL’s 71.53% is 46.7% higher than the industry average of 48.76%. Similarly, his EBITDA margin of 39.61% over the past 12 months is 330.7% higher than his industry average of 9.20%. Moreover, the company’s trailing 12-month EBIT margin was 29.15%, which was 503.4% higher than the industry average of 4.83%.
mixed evaluation
In terms of non-GAAP forward P/E, ORCL’s 22.47x is 9.7% lower than the industry average of 24.87x. Similarly, the non-GAAP forward PEG of 1.75x is 11% lower than his industry average of 1.96x. Furthermore, the company’s forward EV/EBIT of 18.42x is 8.7% lower than the industry average of 20.18x.
However, ORCL’s future EV/Sales of 7.95x is 172.2% higher than the industry average of 2.92x. Additionally, its forward price/sales ratio of 6.48x is 121.1% higher than the industry average of 2.93x. Moreover, his forward price/book ratio of 39.36x is 802.6% higher than the industry average of 4.36x.
Mixed historical growth
ORCL’s revenue has grown at a CAGR of 9.8% over the past three years. The company’s EBITDA has grown at a CAGR of 5.7% over the past three years. Furthermore, total assets increased at a CAGR of 5.1% over the same period.
Meanwhile, ORCL’s net income has shrunk at a CAGR of 6% over the past three years. Furthermore, the company’s EBIT has shrunk at a CAGR of 0.2% over the past three years. Furthermore, over the same period his EPS shrank at his CAGR of 3.3%.
POWR Ratings Show Promise
ORCL has an overall rating of B, which equates to a “buy” in the POWR rating system.of power rating is calculated by considering 118 different factors, each of which is weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. ORCL has a Sentiment Rating of B, consistent with positive analyst expectations. The quality is B grade and profitability is high.
Its historical growth has been mixed, which justifies a C grade for growth. Additionally, ORCL’s stability is consistent with a B grade and a beta value of 0.99.
ORCL is ranked #50 out of 132 stocks. software application industry. click here Access ORCL’s Value and Momentum Ratings.
conclusion
ORCL expects strong business growth over the next few years, aiming for annual revenues of approximately $65 billion and operating margins of 45% by fiscal 2026. We also expect annual EPS growth to be over 10%.
Demand for the company’s Gen2 AI cloud infrastructure continues to outstrip supply, even as new cloud data centers continue to open and existing data centers expand. Additionally, ORCL’s partnerships with NVIDIA and Microsoft are expanding the use of cloud products and enabling customers to move to autonomous databases.
CTO Ellison said ORCL will eventually have more data centers and cloud regions than all other hyperscalers combined.
Given its strong financials, positive analyst forecasts, and high profitability, it may be wise to buy the stock now.
how Oracle Corporation (ORCL) Do you want to outperform your peers?
While ORCL has an overall grade of B, which equates to a Buy, check out the other stocks below that are rated A (Strong Buy) or B (Buy). software application Industry: Egain Co., Ltd. (egan), Karoo Co., Ltd. (Karo), Docebo Inc. (DCBO). To explore more software-application stocks, click here.
What’s next?
Steve Reitmeister, a 43-year investment veteran, shares his market outlook for 2024, his trading plans for the year ahead, and his top 11 stocks.
Stock market outlook for 2024 >
ORCL stock rose $1.34 (+1.07%) in pre-market trading Thursday. Year-to-date, ORCL has increased his 19.52%. In comparison, the benchmark S&P 500 index rose 8.55% in the same period.
About the author: Dipanjan Vanture
Dipanjan has been interested in the stock market since his elementary school days. This earned him a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets.
post Are there compelling reasons to invest in Oracle (ORCL) after earnings? It first appeared stocknews.com