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Why Did Oracle Stock Gain 15%?

Story Highlights

Oracle reported strong earnings in Q4 due to its robust cloud business. Analysts see tremendous upside potential, along with hedge funds indicating a positive confidence signal.

Shares of Oracle Corporation (NYSE: ORCL) surged more than 15% in the extended trading session on Monday after the American multinational computer technology company reported upbeat fourth-quarter Fiscal 2022 (ended May 31) results. 

The quarterly beat posted by the company sparked investor confidence. The strong cloud infrastructure business helped the results, beating analysts’ expectations. 

Results in Detail 

Oracle reported adjusted earnings of $1.54 per share in Q4, which handily beat the Street’s estimate of $1.38 per share. Interestingly, the results beat the company’s high-end guidance by $0.20 per share. 

Additionally, total revenues of $11.8 billion grew 5% year-over-year and topped analysts’ expectations of $11.65 billion. 

Cloud services and license support revenues surged 3% year-over-year to $7.6 billion, while Cloud License and on-premise license revenues increased 18% to $2.5 billion. 

Furthermore, total Cloud Revenue (IaaS plus SaaS) increased 19% to $2.9 billion, while Fusion ERP cloud revenue and NetSuite ERP cloud revenue grew 20% and 27%, respectively. Infrastructure Cloud Revenue jumped 36%. 

Adjusted operating margin came in at 47%, compared with 49% in the prior-year quarter. 

For Fiscal 2022, Oracle posted adjusted earnings of $4.90 per share, up 5% year-over-year. Also, total revenues of $42.4 billion jumped 5%. 

Capital Deployment 

A quarterly cash dividend of $0.32 per share of common stock was announced. This dividend will be paid on July 26, 2022, to stockholders of record as of July 12. 

Official Comments 

In response to the fourth-quarter results, Oracle CEO Safra Catz said, “We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase. Couple a high growth rate in our cloud infrastructure business with the newly acquired Cerner applications business—and Oracle finds itself in position to deliver stellar revenue growth over the next several quarters.” 

Looking forward, the company expects the cloud business to grow more than 30% in constant currency in Fiscal 2023, reflecting double-digit organic growth in Cloud service and license support revenues. 

For Fiscal Q1 2023, Oracle expects total revenues, including Cerner, to increase from 20% to 22% in constant currency, and 17% to 19% in USD. The adjusted earnings are expected to land between $1.09 and $1.13 per share in constant currency and between $1.04 and $1.08 per share in USD. 

Wall Street’s Take  

Following the results, JMP Securities analyst Patrick Walravens maintained a Hold rating on Oracle. 

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on four Buys and eight Holds. The average Oracle price target of $90.30 implies 40.98% upside potential. Shares have lost 21.32% over the past year. 

Hedge Funds 

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Oracle is currently Very Positive, as the cumulative change in holdings across all 31 hedge funds that were active in the last quarter was an increase of 5.3 million shares. 

Bottom-Line 

In the era of digital transformation at a fast pace, Oracle’s cloud business strength reflects the company’s long-term potential. Based on positive hedge funds signal, strong earnings, consistent capital deployment activities, and ongoing investments by the company, investors may want to consider adding the stock to their portfolio.

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