Barron’s on Oracle

In today’s Barron’s, Miriam Gottfried explains why Oracle ($ORCL) kicks ass:

Fourth-quarter guidance was strong with management forecasting above-consensus revenue, new software licenses and earnings for the seasonally strong close to the year. Analysts say margins could come in at peak levels of 51%—reached before the 2010 acquisition of Sun Microsystems—over the next several years as businesses continue to ramp up spending. That Sun acquisition appears to be paying off, much to the surprise of numerous skeptics, driving sales of hardware without damaging margins.

Oracle offers a squeaky clean balance sheet with $9.7 billion, or $1.87 a share, in cash. And to top it off, shares trade at a reasonable 14.5 times projected-forward earnings.

“Oracle’s engineered systems are resonating (50% sequential-Exadata growth), enterprise application spending is firmly back, and gross and operating margins continue to positively surprise,” wrote Ross MacMillan, an analyst with Jefferies & Co.

(…)

Oracle shares have historically outperformed in June as investors anticipate strong fourth-quarter results, according to Citigroup analyst Walter H. Pritchard.

“Shares trade at a 10% premium to the S&P versus a historical ceiling of 20%, leaving some room for multiple expansion,” he wrote in a note. “We’d continue to buy as we see trends as sustainable, seasonal strength on tap and headroom to valuation.”

We would follow that advice and snap up some Oracle shares on the promise of a profitable, growth-fueled future.

Posted by on March 26th, 2011 at 6:39 pm


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