Oracle Corporation (ORCL)

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Oracle Stock Surges, With Record High In Sight, On Cloud-Driven Q2 Earnings Beat
By: TheStreet | December 10, 2021

• Oracle shares will test their all-time highs Friday following stronger-than-expected second quarter earnings and a robust outlook for cloud services demand.

Oracle (ORCL) shares surged higher Friday, potentially testing their all-time high, after the cloud-focused software group posted better-than-expected second quarter earnings and a robust near-term outlook.

Oracle, which earns the bulk of its revenues from its cloud services and license support unit, beat Street earnings forecasts by a dime with an adjusted second quarter bottom line of $1.12 per share.

Cloud division revenues topped $7.5 billion as companies continue to spend on hybrid work solutions in a post-pandemic world, while overall revenues grew by 6% to $10.4 billon. Profit margins in the cloud unit were pegged at a staggering 84%, but some analysts noted that the cloud division growth rate lagged notably behind rivals such as Salesforce (CRM) and SAP (SAPGF).

Bookings grew at an even faster pace, rising 11% from last year's levels, giving Oracle the confidence to forecast current quarter revenues in the region of $10.7 billion to $10.9 billion, based on growth forecasts, with profits of between $1.19 and $1.23 per share.

"We have a highly differentiated strategy from our competitors where we are the only company able to offer the combination of applications and infrastructure in the cloud," CEO Safra Catz told investors on a conference call late Thursday. We have best-of-breed capabilities in both infrastructure and apps, but also a highly differentiated set of industry-specific cloud SaaS applications. And of course, our second-generation cloud with autonomous database are unique in their performance, security and dependability."

"Cloud is fundamentally a more profitable business compared to on-premise, and I expect that our operating margins this year will be the same or better than pre-pandemic levels of 44%,' Catz noted.

Oracle shares were marked 13.8% higher in to indicate an opening bell price of $101.00 each, an all-time high and a move that would extend the stock's six-month gain to around 23%.

"These results and guidance reinforce our belief that Oracle is well-positioned to emerge as the #3 or #4 vendor in the (cloud services market) market and as the #2 vendor in the (software as a service ) market - enabling the company to reaccelerate revenue growth for multiple years," said Credit Suisse analyst Phil Winslow, who carries a $110 price target and an 'outperform' rating on the stock.

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