Oracle Corporation – This business has transformed into a long-term winner
Time to buy the dip?
I’ll be honest. When Oracle reported fiscal Q2 earnings last week, I was kind of hoping for a miss. You see, the company is at the top of my watchlist, and in recent months, I have been eagerly waiting to initiate a position at the right price, but shares have shown barely any weakness, remaining bloody expensive.
Although, for good reasons. In recent years, but especially in 2024 so far, Oracle has emerged as a big cloud computing and AI player, differentiating itself from the competition with a unique focus on price, speed, and, most notably, its focus on the multi-cloud strategy, which I believe is the right direction for long-term success.
This cloud and AI edge is driving incredible growth for this once-so-boring and struggling business. The company has reinvented itself and is now a leader in AI and cloud computing, being the favored platform for AI training and used by giants like OpenAI, Meta, Nvidia, and xAI.
This cloud computing success is driving rapid and accelerating growth for Oracle, fueling an exciting bull case that should last well into the next decade. Management is now guiding for double-digit revenue and EPS growth through 2030.
Plenty to be bullish about here, and this reinvented company and differentiated cloud leader has worked itself to the top of my watchlist, as I view it as a very compelling business to potentially own for decades, though only at the right price.
Anyway, Oracle shares did indeed sell-off last week as the company did, in fact, miss the Q2 consensus estimates on top and bottom lines, leading to a minor sell-off with shares trading at a hefty premium before.
Meanwhile, Oracle did actually report really impressive underlying trends and growth, solidifying its bullish outlook through the end of the decade and delivering on previous promises. I must say, I was really pleased with this quarter from Oracle.
But what does this mean for its valuation and appeal, especially given that shares were down almost 10% last week and the company is performing really quite well under the hood?
Well, let’s find out. Let’s delve into the company’s Q2 results and update the financial projections and target price.
Oracle delivers an excellent quarter!
Oracle reported its fiscal second-quarter earnings early last week, on Monday, December 9th, but the company failed to impress. Shares shed about 7% during the Tuesday trading session and lost about 12% over the last week.
However, I will argue that the company delivered a really good quarter overall, even though it missed both the top and bottom-line consensus estimates by a thin margin, primarily due to overly bullish consensus estimates.
You see, Oracle actually saw all its segments exceed its internal forecasts, including revenue, which actually came in at the high end of management’s guided range but missed the consensus by $20 million, nevertheless.