Oracle stock forecast: Is ORCL a good buy?
Oracle has had a very interesting 12 months. Can it continue to grow?
In this forecast
Overall, 2020 was an unusual year for Oracle stock news. Many companies reacted with surprise when the company announced that it had thrown its hat into the ring to purchase TikTok, with then President Donald Trump insisting the Chinese app must fall under American ownership or else it would be banned in the United States.
Some Oracle stock predictions were rather dubious about what this collaboration would mean, pointing out that the corporate behemoth had zero experience in social networks, let alone the latest popular app beloved by teenagers. But other analysts were quick to spot the advantages of such a deal - data.
In the last few weeks of his presidency, Trump tried without success to get the app banned. Nevertheless, shares in Oracle have risen by around 20% so far this year.
Let’s cast a spotlight on the latest Oracle share price predictions for 2021 and look at how recent events have affected the stock, most notably the latest set of financial results.
Two big bits of news
Before that, we should mention a couple of things which will have had an impact on the Oracle share price.
On May 25, Oracle announced plans to develop new cloud computing options using chips based on the Arm system in a bid to encourage more app developers to use its systems. Speaking at the time, executive vice president Clay Magouyrk said:
“Now customers who need an Arm platform for development can get the flexibility, scalability, and price-performance they need. We're also making it really easy for developers to move their apps and develop new ones on Oracle Cloud Infrastructure."
Secondly, and perhaps more seriously, the US Supreme Court ruled on April 5 that Google’s use of code copied from Oracle’s Java software in Google’s Android system was fair use. Oracle had tried to sue Google for $9bn. In his majority opinion, Justice Stephen Breyer said Google had used “only what was needed to allow users to put their accrued talents to work in a new and transformative program”.
“To the extent that Google used parts of the Sun Java API to create a new platform that could be readily used by programmers, its use was consistent with that creative ‘progress’ that is the basic constitutional objective of copyright itself,”
Quarterly results: looking good?
When the company’s quarterly results for the three months ending on 31 May 2021 came out on 15 June, things looked better than expected. For instance, Oracle’s revenue hit $11.23bn, higher than the $11.04bn many analysts had predicted. Meanwhile, adjusted earnings a share were $1.54, higher than the $1.31 that Wall Street had thought it would be.
CEO Safra Katz said results were “absolutely outstanding”, adding: “Our multi-billion dollar Fusion and NetSuite cloud applications businesses saw dramatic increases in their already rapid revenue growth rates: Fusion ERP was up 30% in Q3 and up 46% in Q4, Fusion HCM was up 23% in Q3 and up 35% in Q4, NetSuite was up 24% in Q3 and up 26% in Q4. Oracle Fusion is the world's biggest cloud ERP business; Oracle NetSuite is the world's second biggest cloud ERP business. Revenue from our Gen2 Cloud Infrastructure business including Autonomous Database grew over 100% in Q4. The accelerating growth rates of both our applications and infrastructure cloud businesses this year drove earnings per share growth up to 21% in FY21. That is the fourth consecutive year of double-digit earnings per share growth at Oracle Corporation."
The biggest part of Oracle’s business, cloud services and licence support, was up 8% on the same quarter a year ago, hitting $7.4bn, slightly up on predictions of $7.32bn.
ORCL price history
|Nov 26, 2021||92.21||0.18||0.20%||92.03||93.93||91.90|
|Nov 24, 2021||93.47||1.38||1.50%||92.09||93.59||92.03|
|Nov 23, 2021||92.80||-1.21||-1.29%||94.01||94.02||92.15|
|Nov 22, 2021||94.51||0.95||1.02%||93.56||95.57||93.28|
|Nov 19, 2021||93.83||-0.86||-0.91%||94.69||96.81||93.83|
|Nov 18, 2021||94.55||-0.41||-0.43%||94.96||95.06||93.33|
|Nov 17, 2021||95.22||-0.29||-0.30%||95.51||95.98||94.71|
|Nov 16, 2021||95.49||1.48||1.57%||94.01||96.26||93.90|
|Nov 15, 2021||93.91||0.37||0.40%||93.54||94.14||92.79|
|Nov 12, 2021||93.43||-0.49||-0.52%||93.92||94.32||93.32|
|Nov 11, 2021||93.92||0.04||0.04%||93.88||94.65||93.64|
|Nov 10, 2021||93.74||-0.15||-0.16%||93.89||94.74||93.23|
|Nov 9, 2021||94.47||-0.45||-0.47%||94.92||95.50||93.95|
|Nov 8, 2021||95.04||0.13||0.14%||94.91||95.14||94.19|
|Nov 5, 2021||94.85||-1.18||-1.23%||96.03||96.42||93.98|
|Nov 4, 2021||95.52||-0.56||-0.58%||96.08||96.50||95.21|
|Nov 3, 2021||96.04||0.03||0.03%||96.01||96.76||94.64|
|Nov 2, 2021||95.77||2.28||2.44%||93.49||95.80||93.49|
|Nov 1, 2021||94.29||-1.55||-1.62%||95.84||95.90||93.80|
|Oct 29, 2021||95.84||0.08||0.08%||95.76||96.85||95.36|
The markets disagree
But markets were not so sure. The Oracle share price at close of trading on 15 June, just before the update was issued, was $81.60. Overnight trading saw the price lose 5% to settle around the $77.50 mark. When trading opened on June 16, Oracle was back up slightly from its overnight lows, standing at $77.97 a share – down by more than 3% on the previous afternoon.
These overnight losses were attributed, at least in part, to a post-report call wherein Catz suggested her company would not make the same sort of profits in the near future. She said that the guidance for adjusted earnings a share should be somewhere between $0.94 and $0.98, and that there should be between 3% and 5% revenue growth in the next fiscal quarter. This contrasts with the Refinitiv prediction of adjusted earnings a share of around $1.03, although it does match with analysts’ guidance of around 3% revenue growth.
Catz said that the company would spend more on cloud technology:
“We expect to roughly double our cloud capex spend in FY 2022 to nearly $4bn. We are confident that the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time.”
Another issue is that the company’s revenue from hardware was down 2% at $882m, in line with analysts’ predictions.
One of the challenges that Oracle faces is moving from being a company that specialises in traditional computing to one which makes use of cloud technology.
A challenging future?
When it comes to the future, analysts don’t seem to be all that positive about the ORCL stock forecast. Although there is a high 12-month Oracle stock prediction of $115 among the 22 analysts polled by CNN, which would see an increase from the current Oracle share price of around 40.8%. The median 12-month Oracle stock forecast puts it at $79.65 in June 2022. The most negative Oracle stock price forecast suggests it could be as low as $60, a loss of more than 23%.
As far as analysts’ advice goes, things are in a cautious place. Of 27 investment experts polled, five say people should buy Oracle, two say it will underperform, two say sell and the vast majority, 18, say people should hold their stock.
At least one Oracle stock forecast is very optimistic. However, the median prediction sees Oracle, a stock which has grown considerably over the last few months, making marginal gains over the next year – but even the lowest forecast is higher than the $64.69 it closed at in 2020 at. Be sure to remember, though, that predictions can be wrong, that stock prices can go down as well as up, and that you should never invest more than you can afford to lose.
In the short term, probably not. if it does rise, it will probably not go up by much. Some Oracle stock forecasts suggest that it could go up in the next 12 months, but the consensus is that it will stay roughly where it is, or actually go down, although we don’t know by how much.
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