Nomura On Oracle: 'Hop On This Train'

After gaining nearly 30 percent over the past year, analysts at Nomura see even more upside for Oracle Corporation ORCL's stock. 

The Analyst

Nomura Instinet's Christopher Eberle initiated coverage of Oracle's stock with a Buy rating and $64 price target.

The Thesis

The case for buying Oracle's stock is based on the belief that companies will continue taking a hybrid approach to their cloud strategies and flocking toward Oracle's products and services, Eberle said in the initiation note.

The company's $33-billion on-premise business incumbency, combined with what is considered to be the "deepest" cloud-based application suite across ERP, HCM and CRM, positions Oracle "extremely well" to dominate the market, Eberle said. 

The analyst gave five reasons to justify a bullish stance: 

• The "depth and breadth" of Oracle's cloud-based application business suite product line is resulting in "meaningful" market share gains.
• The on-premise software has now reached an inflection point, as evidenced by growth in the new license software segment for the first time in 13 quarters.
• The cloud ERP total addressable market happens to be "significantly larger" than the on-premise ERP market, and Oracle has proven it can move down into the market and offer products and services at a much lower price point, according to Nomura. 
• Oracle's margin expansion will become "more meaningful" to the overall business model as cloud, SaaS, PaaS and IaaS grow to become a larger percentage of overall revenue.
• The economics surrounding total automation could prove to be "significant" for both Oracle and its customers and create a higher-value proposition, Eberle said. 

"In our view, the Street is overly concerned about cloud trends and competition from new database technologies and is not sufficiently focused on a more stable legacy core." 

Price Action

Shares of Oracle were up 0.78 percent Wednesday afternoon. 

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