Oracle Corporation (NYSE:ORCL) is likely a company you’re familiar with. With over 400,000 customers and annual revenues of more than $38 billion, it is one of the largest enterprise software companies in the world.

While most tech companies reported their earnings results earlier in the latest cycle, Oracle trades out of phase with the larger NASDAQ earnings calendar and didn’t release its numbers until Dec. 14.

The stock sank on the numbers, but I view the dip as an excellent buying opportunity.

For one, revenues were up 6% to $9.62 billion, topping the expected $9.57 billion.

EPS of 70 cents (versus 61 cents last year) was 2 cents better than expected.

The gains were driven by a 44% increase in cloud-based sales.

The company also raised its share buyback by $12 billion.

The main reason behind ORCL’s decline following its quarterly report was management’s guidance for third-quarter revenue growth of 2%-4% versus the expected 4.2%.

But during the conference call, they made a spirited defense that the company will still see accelerated growth. In fact, Chairman Larry Ellison believes that it is 80% cheaper for companies to run their databases on Oracle Cloud than Amazon.com, Inc. (NASDAQ:AMZN). He also noted that the company just received a $50 million order from Amazon.

In regard to competition, Oracle feels it is maintaining market share. It does not believe that open-source database company MongoDB Inc (NASDAQ:MDB) is much of a threat, since its annual revenues are only expected to be approximately $150 million. Ellison highlighted that there is a lag time before new cloud customers start to pay monthly revenues. Additionally, many customers are waiting for Oracle’s new autonomous database to be released. Both factors will have an impact on near-term revenue growth.

Oracle Is Growing at a Nice Clip
While the forward guidance was disappointing, it’s clear that ORCL is still growing at a nice clip and has plenty of room for margin improvement in its cloud business.

I’m not too concerned about the lower guidance. I think a lot of it was related to revenue recognition timing issues tied to Oracle’s cloud business, as well as customers holding back orders until the company’s autonomous database is introduced next year.

In the meantime, at less than 16X May 2019 EPS estimates (excluding any tax reform benefits), the shares remain very cheap in an environment where value is getting harder to find.

I see ORCL easily reaching $56 in the longer term. With it trading about 17% below that price, now is the time to position yourself before the stock resumes its climb upward.

— Hilary Kramer

[ad#IPM-article]

Source: Investor Place