Tags: Oracle | price | languish | ORCL

Oracle, a Tech Leader, Sees Its Share Price Languish

By    |   Thursday, 19 July 2012 01:43 PM

Oracle (ORCL) is far and away a leader in the tech market segment, yet it has seen its share price languish against its benchmark over the past 12 months, returning close to negative 5 percent while the Nasdaq turned in nearly 4.5 percent to the upside. Analysts, meanwhile, are broadly bullish on the company’s outlook, even taking into account the possibility of slower tech spending.

Oracle is the world’s largest provider of enterprise software and a leading provider of computer hardware products and services. Its software, hardware systems, and services businesses develop, manufacture, market, host and support database and middleware software, applications software, and hardware systems, with the latter consisting primarily of computer server and storage products.

Oracle’s businesses provide products and services are built upon industry standards, are engineered to work together or independently within existing customer information technology (IT) environments, and run securely on a wide range of customer IT environments, including cloud computing environments.

“We believe our internal growth and continued innovation with respect to our software, hardware and services businesses are the foundation of our long-term strategic plans,” management said in a recent filing.

“In each of fiscal 2012 and 2011, we invested $4.5 billion and in fiscal 2010, we invested $3.3 billion in research and development to enhance our existing portfolio of products and services and to develop new products and services.”

Oracle management also reiterated a commitment to growth through M&A. “In recent years, we have invested billions of dollars to acquire a number of companies, products, services and technologies that add to, are complementary to, or have otherwise enhanced our existing offerings. We expect to continue to acquire companies, products, services and technologies to further our corporate strategy,” management said.

Oracle has a market cap of $148.92 billion in a sector, software, where the average company size is $12.24 billion. Its trailing 12-month P/E ratio is 15.48 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.33, compared to 0.91 for the sector.

Its projected earnings per share growth for the coming year is 9.77 percent, compared to a sector average of 15.30 percent.


Wall Street is bullish on ORCL, with buy or outperform calls from Raymond James, Caris & Company, Stifel Nicolaus, Friedman, Billings, Ramsey & Co., RBC Capital Markets, Oppenheimer & Company, UBS, and Citigroup Investment Research.

“Oracle possesses a strong product pipeline, which will drive broad-based top-line growth going forward. Moreover, speedy adoption of Exadata, Exalogic, Exalytics, the core SPARC product line and fusion systems will drive incremental top-line growth going ahead,” said the analysts at Zacks Investment Research, in a note dated June 28 that reiterated their hold rating on shares.

“However, lower hardware volumes remain a concern in the near term. We believe that Oracle will take at least another three to four quarters to achieve top-line growth in the hardware segment. Moreover, we anticipate that a sluggish market and lower IT spending may act as a headwind going forward.”

Oracle next reports in mid- to late September.

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Thursday, 19 July 2012 01:43 PM
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