Oracle's Stock Value Surges As Company Enters 'Hypergrowth' Phase

Oracle Corporation ORCL, while not quite Magnificent Seven material, the company has been a fighter to maintain its position among the cloud technology giants such as Microsoft Corporation MSFT and Amazon.com Inc. AMZN.

A solid set of results after the market close on Monday have set the stock up for a 13% pop on Tuesday.

Forecast-beating results are pleasing for markets. But a super-confident outlook report is worth so much more.

The company spoke of “hypergrowth” in its Gen2 cloud infrastructure business. “We expect to continue receiving large contracts reserving cloud infrastructure capacity because the demand… substantially exceeds supply,” said CEO Safra Catz.

The company added that it was opening new and expanding existing cloud datacenters “very rapidly.”

Oracle, founded in 1977 by Larry Ellison, Bob Miner and Ed Oates, specialized early on in developing databases, and by the time of its initial public offering in 1986, the company’s flagship product Oracle Database was already running on Microsoft’s flagship offering MS-DOS.

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Analyst Reaction

Analysts were upbeat about the performance of Oracle in the fourth quarter. Raimo Lenschow at Barclays Investment Bank maintained an Overweight rating on the stock and raised the target price from $140 from to $147.

Piper Sandler analyst Brent Bracelin maintained an Overweight rating and raised the price target from $122 to $140.

Brent Thill at Jeffries reiterated a Buy rating on the stock and raised the target price from $145 to $150, noting improving trends in cloud infrastructure and demand for artificial intelligence (AI) workloads.

Partnerships With Big Tech

Indeed, Oracle partnered with AI-processing equipment giant Nvidia Corporation NVDA, announcing last year that Nvidia would be running its strategic AI application on the new Oracle Cloud Infrastructure Supercluster — a supercomputer that offers cloud services at massive scale.

“This is a critical capability as more and more organizations require computing resources for their unique AI use cases,” said Clay Magouyrk, executive vice president for the project.

Oracle also formed a partnership with Microsoft in 2019 pairing up Oracle Cloud with Microsoft Azure to allow customers of both companies to store data on both cloud platforms, running software through either Oracle or Azure.

Thus, Oracle has placed itself strategically among the Magnificent Seven stocks, yet without the same level of market scrutiny these mega-caps come under from investors every time the market sees a hint of selling.

And, with a price to earnings ratio of just 30, there are few analysts who are likely to call this an overvalued stock compared, for example with Nvidia’s P/E of 70.

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