Oracle is the IBD Stock of the Day amid a bullish bounce from its 21-day exponential moving average. ORCL stock hit a record high in mid-June as investors focused on potential growth from artificial intelligence workloads running on its cloud-computing network.
Oracle's multiyear business restructuring has moved the database software giant solidly into cloud computing. In addition, Oracle bought health care giant Cerner in 2022, continuing an acquisition spree spanning decades. In 2016, Oracle acquired NetSuite for $9.3 billion. NetSuite sells cloud-based enterprise resource planning software.
On the stock market today, ORCL stock rose 1.1% to 119.09. Oracle has shot up 46% in 2023, with shares hitting a record high of 127.54 on June 15. Also, after pulling back for a couple of weeks, ORCL stock has bounced off its 21-day line, offering an alternative entry around 115.
In addition, Oracle stock has been added to IBD's SwingTrader platform.
ORCL Stock: Management Touts AI
When reporting fiscal fourth-quarter earnings on June 12, Oracle management touted potential growth in its cloud business, thanks to corporate adoption of generative AI.
"Management made the case for OCI's (Oracle Cloud Infrastructure) role in the context of generative AI workloads, as the company sees success on several fronts," Morgan Stanley analyst Keith Weiss said in a note to clients.
Further, he added: "Namely, Nvidia is using OCI to build a high-performance computer and serve customers in specialized fields. And, Oracle is starting to offer generative AI services trained on its own private data to customers — culminating in $2 billion of signed AI contracts over the past two quarters."
Chipmaker Nvidia is among AI stocks to watch.
Access to "Big Data" is key for enterprise adoption of generative AI. Oracle has partnered with startup Cohere, which has developed large language models, or LLMs, to train AI models.
Generative AI technology already is finding applications in internet search, marketing, advertising, drug development, video gaming, customer support and digital art. Generative AI creates text and images based on patterns in training data.
AI Tools Embedded In HR Platform
Oracle on June 29 announced it has embedded new generative AI capabilities into its human-resources platform to improve productivity and employee experiences.
"Leveraging LLMs, Oracle Fusion customers will be able to author content such as job recommendations or performance goals with short prompts, apply generated suggestions for things like survey questions or personal development tips and quickly summarize key elements of content," Deutsche Bank analyst Brad Zelnick said in a report. He noted that Oracle currently will not charge customers extra for the new AI tools, unlike Microsoft's AI marketing approach.
Oracle faces competition in AI database services from cloud software startups such as Snowflake and privately held Databricks. Over the last several years, Oracle has transitioned from being a legacy on-premises database software provider to a subscription-based software model that taps the benefits of cloud computing.
In fiscal 2024, analysts estimate earnings growth of nearly 10% to $5.62 a share for ORCL stock. Revenue is expected to grow 8% to $54.02 billion.
A Jefferies report says that as of the end of fiscal 2023 on May 31, Oracle had $91 billion in debt and $10 billion in cash and cash equivalents on its balance sheet. A year earlier, it had only $76 billion in debt and $22 billion in cash
With a large debt load, Oracle has downsized its quarterly repurchases of ORCL stock, which boosted earnings. But Oracle still had $8.2 billion remaining in stock buyback authorization at the end of May.
Cerner Acquisition
The jury is still out on Oracle's $28 billion Cerner acquisition. Cerner contributed a total of $5.9 billion in revenue in fiscal 2023, down 1% from the previous fiscal year. Further, Cerner has pressured profit margins.
The IBD Stock Checkup tool shows that Oracle has a Composite Rating of 93 out of a best-possible 99. The rating means Oracle stock currently outperforms 93% of all stocks in fundamental and technical stock-picking criteria.
ORCL stock has a Relative Strength Rating of 95. The rating shows how a stock's price performance over the last 52 weeks holds up against all the other stocks in IBD's database.
Also, Oracle has an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
