Oracle’s (ORCL) quarterly results on Monday night will highlight the Club’s still undiscovered artificial intelligence capabilities. Wall Street sees Oracle earning $1.15 per share on revenue of $12.47 billion in the first quarter of fiscal 2024, according to estimates compiled by LSEG, formerly known as Refinitiv. That would represent 11.65% year-over-year EPS growth and about 9% revenue growth. Oracle stock is trading near its all-time high of $126.55 on June 15. The stock is up more than 50% in 2023. Oracle YTD Performance Peaks ORCL YTD “I think Oracle has to be the star of the show,” said Jim Cramer, who believes the transformation at this legacy tech company is putting it at the forefront of the innovative AI race among cloud providers . The company’s close relationship with Nvidia (NVDA) — the dominant AI chipmaker and a Club name — has helped Oracle Cloud Infrastructure, or OCI, become an increasingly popular platform. attractive to companies working with emerging technology. Oracle has “strengthened their relationship with Jensen Huang,” Jim said, referring to Nvidia’s CEO. Oracle’s cloud computing business is smaller than the leading U.S. hyperscalers: Amazon Web Services (AWS), Microsoft’s Azure and Google Cloud. But OCI has grown like a weed and become a more meaningful part of revenue for the company as a whole. In the three months ended May 31, revenue from Oracle’s cloud infrastructure unit rose 76% year-over-year to $1.4 billion, nearly 10% of the company’s total revenue. ty. Amazon (AMZN), Microsft (MSFT) and Google-parent Alphabet (GOOGL) are also Club stocks. Barclays said in a note to clients on Thursday that OCI’s performance in the soon-to-be-reported fiscal first quarter – along with management’s comments on its future AI opportunities – will driving post-earnings trading in Oracle shares. In that regard, Oracle has a favorable setup as OCI is likely to hit a “healthy beat” relative to expectations, the analysts wrote. Barclays upgraded Oracle to a buy-equivalent rating on Tuesday, citing a multi-year growth story stemming from OCI and other key Oracle businesses moving to the cloud. Analysts there also increased their price target on the stock to $150 per share from $126. Analysts at UBS had a similar view last week when they also upgraded Oracle stock to buy. In a note to clients, the company argued that, if Oracle’s much larger software and traditional database businesses remain at least stable, additional cloud computing momentum will continue. continued to lift Oracle shares higher. UBS also raised its price target on Oracle to $140/share from $120. Analysts wrote that UBS has become more confident that Oracle has “created an underappreciated advantage” in its ability to access Nvidia’s top graphics processing units (GPUs) and how to OCI’s architecture allows those GPU clusters to work together efficiently. UBS said this one-two punch was “enough to attract new customers and drive OCI adoption,” especially given that demand for Nvidia GPUs outstrips current supply as seen in the report. Nvidia’s latest stellar earnings report. Wall Street analysts are increasingly bullish on Oracle – as evidenced by new buy ratings and price target increases at Barclays and UBS – but the company remains significantly less popular than its peers. Holding Other Club has established itself as an innovative AI leader. Jim believes that Oracle is also in that camp. According to FactSet, only 52% of analysts have a buy-like rating on Oracle stock, compared with 94% for Nvidia and 86% for Microsoft, a close partner of the startup that created ChatGPT. Semiconductor company Broadcom (AVGO), another AI-exposed company and also a Club name, has buy-equivalent ratings from three-quarters of the company’s analysts, according to FactSet. Of course, there are many factors that influence analyst ratings of a stock — and in Oracle’s case, AI-related revenue is still only a small part of that company’s bottom line. . Even so, the fact that 15 of Oracle’s 33 analysts have a neutral rating on the stock reinforces the idea that its AI opportunity is in its early stages and that incremental buyers will lurking as the story progresses. Additionally, at less than 22 times forward earnings, Oracle is reasonably valued compared to its peers — not to mention the market, with the S&P 500 at 18.7 times. The Bottom Line We bought into the story, which prompted us to initiate a position last month at under $116 per share. We expect that, over time, Oracle’s growing deployment of AI and cloud sharing will attract new investors to the stock and convince more analysts of its potential. Another strong earnings report on Monday could help do that. (Jim Cramer’s charitable foundation includes ORCL, NVDA, MSFT, AMZN, GOOGL and AVGO. See here for the full list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you’ll receive a transaction alert before Jim makes a transaction. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before making a trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , ALONG WITH OUR DISCLAIMER . NO OBLIGATION OR DUTY OF AUTHORITY EXISTS OR IS CREATED BY YOUR RECEIVED OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Exterior view of Oracle Field Office at Wilson Avenue in Arlington, Virginia, October 18, 2019.
Tom Brenner | Reuters
by Oracle (ORCL) quarterly results on Monday night will highlight the Club’s as-yet undiscovered artificial intelligence capabilities.
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