Are Bearish Investors All Wrong About Oracle Stock?
Key Points
Investors have been both bullish and bearish on Oracle over the past year.
The stock had been in a bit of a tailspin of late, but its recent earnings report has given it a boost.
Oracle beat analyst expectations in its most recent quarter for both revenue and earnings.
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Shares of Oracle (NYSE: ORCL) have been on a bit of a roller coaster over the past year. The stock has gone from being a promising company to invest in due to its importance in the artificial intelligence (AI) revolution to one that has perhaps too much debt and exposure to OpenAI. That's evident in the stock's 52-week range, with it being as low as $118 and as high as $345 over the past 12 months.
The company recently reported strong earnings numbers, which showed significant growth on both its top and bottom lines. Its guidance was also looking promising. Have bearish investors gotten things all wrong about Oracle, and is the tech stock actually a good buy right now?
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Oracle shows strong growth in Q3, particularly in its cloud business
Earlier this week, Oracle released its third-quarter earnings numbers, covering the three-month period ending Feb. 28. Its revenue for Q3 totaled $17.2 billion, which was an increase of 22% from the same period a year ago. Analysts were expecting revenue to be around just $16.9 billion. In its cloud business, the growth rate was even more impressive at 44%, as that segment of its operations generated $8.9 billion.
What was also important was that on the bottom line, the company's financials also looked good as Oracle's adjusted earnings per share (EPS) totaled $1.79, surpassing expectations of $1.70.
Looking ahead, the company continues to expect revenue growth of around 19% to 20% for the final quarter of its fiscal year (which ends in May). It also upgraded its guidance for the next fiscal year by about $1 billion, now expecting its top line to reach $90 billion.
Does Oracle's stock have room to rise higher?
Oracle's stock rose on the results and may have risen higher if not for economic concerns and the war in Iran. Markets have been shaky of late, but Oracle's stock has been a bright spot. And according to analysts, there could be massive upside for growth investors as the stock has a consensus price target of just over $268 -- this suggests it might rise by as much as 67% from where it is today.
There is some risk with Oracle due to its close relationship with OpenAI and its dependence on AI spending remaining high for the foreseeable future. I wouldn't say bearish investors are wrong to worry about Oracle, but its risk is comparable to that of many top AI stocks these days.
Oracle is one of the major players in the tech sector, and it has been for years. As long as you're comfortable hanging on to it for the long term, it can be a great buy today.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
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