Oracle (ORCL) stock has silently done well in the past decades, transforming Larry Ellison into the fourth-richest person globally with a $186 billion fortune. It has risen in the last two consecutive months and is sitting near its all-time high of $180.
Oracle shares have soared by over 346% in the last decade, outperforming other traditional technology companies like Cisco and International Business Machines (IBM). They have soared by 64.5% this year.
What is Oracle and what does it do?
Oracle is not a household name because it does not provide its solutions to individuals. Instead, it is one of the leading players in the business-to-business industry, where it offers its services to large and medium-sized companies.
Oracle offers many solutions to global companies. For example, it has an Enterprise Resource Planning (ERP) solution that lets companies simplify their internal processes and decision-making. It is one of the biggest competitors to SAP, the market leader in the ERP industry.
Oracle also offers the Enterprise Performance Management (EPM), which provides services like financial performance analysis and closing solutions. Its other services help companies handle their supply chain and manufacturing management, manage their human resources, and do sales and marketing.
In the past few years, it has used its acquisitions to enter other industries. It acquired NetSuite, a cloud solution for SMBs that includes some of the top solutions like ERP, human resource, and customer relations. It also used its $26 billion Cerner acquisition to enter the huge healthcare industry sector.
Therefore, while Oracle is known for its database solutions, it has expanded its business to become one of the biggest software companies in the industry. It has also silently become a leading players in the artificial intelligence (AI) industries.
Oracle’s business has grown substantially in the past few years, partly because of its acquisitions. Its annual revenue has jumped from $39 billion in 2019 to over $52.9 billion in the last financial year.
However, its annual profits have not grown that much, remaining around $10 billion in that period.
Read more: Oracle’s bull run: can the rally continue?
Oracle’s business is doing well
The most recent financial results showed that Oracle’s business did well. Its revenue rose by 7% to $13.3 billion, helped by its cloud solutions. Cloud revenue rose by 21% to $5.6 billion, while the infrastructure, cloud applications, ERP, and NetSuite jumped nu double digits.
The company is also working to grow its market share in the data center industry. Larry Ellison, who serves as the Chief Technology Officer, noted that it had 162 cloud data centers in operation and others under construction. Its biggest is an 800-megawatt center that will have acres of NVIDIA GPU clusters for training AI models.
Analysts believe that Oracle’s business will continue doing well, albeit at a slower pace in the coming years.
The average estimate is that its revenue for the current quarter will be $14 billion. Annually, its revenue is expected to grow by about 20% to $58 billion. A 20% annual growth rate for a company that has been in business since 1977 is impressive.
For example, Salesforce, a SAAS company started in 1999 is expected to grow by 8.60% this year. Similarly, Microsoft’s annual growth rate is expected to be 13.8%, while Amazon will grow by 10.5%.
However, there are concerns about Oracle’s valuation, which has become stretched in the past few years. Oracle has a trailing P/E ratio of 44.7, higher than the five-year average of 26. It also has a forward P/E ratio of 37, higher than the five-year average of 26. Oracle also has a price-to-book ratio of 44, higher than the industry median of 3.3.
Therefore, analysts have a mild estimate about Oracle, with the average stock target being $181, a few points above the current $173.
Read more: Oracle teams up with Palantir on AI solutions
Oracle stock price analysis
ORCL chart by TradingView
The weekly chart shows that the ORCL share price has been in a strong bull run in the past few years. Most recently, it has slipped in the past two weeks.
Oracle remains about 30% above its 50-day moving average and 47% higher than the 100-day MA.
The Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have all pointed upwards.
Therefore, Oracle shares will likely continue soaring in the long term. However, in the short term, there is a likelihood that it will have a brief retreat, potentially to $150, and then resume the bullish trend. This retreat may happen ahead of its earnings, which are set to happen on December 9.
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