/code%20on%20computer%20screen%20java%20html.jpg)
Oracle Corp. (ORCL), the tech giant known for its databases and cloud solutions, has hit a rough patch recently. On Dec. 12, the stock took a nosedive by 12.4%, triggered by a revenue miss in the company's fiscal second-quarter results, as well as a cautious outlook that spooked investors.
This stumble comes at a time when Oracle's cloud growth, though still solid, seems to be falling short of expectations. The company is navigating through a phase of high hopes and heightened volatility, as the broader tech sector comes under the microscope in 2024 - with investors on the hunt for signs of sustainable growth amid lingering economic uncertainties.
As a result, it's worth considering whether the sharp pullback in ORCL might be a potential buying opportunity. Here's a closer look at the stock's valuation, growth forecasts, and what analysts are expecting next.
Oracle Stock: Performance and Valuation Metrics
Oracle has been a major player in the tech world since 1977, offering cloud computing, databases, and software solutions to a global customer base of over 400,000 in more than 175 countries. The stock has a market cap of over $287 billion.
While the shares have struggled since Q2 earnings came out - the stock's second consecutive post-earnings bear gap, following a Q1 whiff - ORCL is still hanging onto a gain of 19.6% over the past 52 weeks.
Notably, both earnings-related drops in ORCL were related to top-line misses and concerns over cloud growth. In both Q1 and Q2 of FY 2024, ORCL beat Wall Street's earnings-per-share estimates.
The stock also offers a 1.53%, backed by nine consecutive years of growth. With a modest payout ratio of 29% and healthy free cash flow, ORCL has plenty of headroom to keep paying back shareholders with dividend hikes and share buybacks.
Oracle has a PEG ratio of 1.37 at current levels, indicating it's reasonably priced for expected earnings growth. Plus, it's valued at 15.6x cash flow, which is a discount to most of its tech sector peers.
What Do Analysts Expect for ORCL?
Analysts are predicting an 8.5% increase in adjusted earnings per share (EPS) for fiscal year 2024, along with a 7% revenue increase. And for fiscal 2025, Wall Street is targeting 12% bottom-line growth and 8.3% top-line growth.
While ORCL's growth prospects aren't as massive as some other artificial intelligence (AI)-linked tech names, its forward revenue and EPS projections are still north of tech sector medians. That, combined with its attractive valuation and appealing dividend yield, make the stock worth considering here.
Analysts are giving the stock an overall “moderate buy” rating, with 25 recommendations in total. Out of these, 12 are shouting "strong buy" and 13 are saying “hold.”
The mean target price is $126.38 for Oracle stock, which is a 22% premium to current levels.
For investors who can keep their expectations in check when it comes to cloud growth, Oracle's latest pullback might be a dip worth buying. With robust cash flow, a solid dividend payout, and steady earnings growth, ORCL looks like a potential value pickup right here.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
