ORCL Is The Best Way To Play The Cloud


Oracle (ORCL) is one of those stocks – like Cisco (CSCO) – that was all the rage 25 years ago but mostly forgotten about today. My contention however is that that is in the process of changing as ORCL stealthily becomes a cloud play and its growth returns.

ORCL reported 3Q22 earnings Monday after the close (its fiscal quarter ended Aug 31). Revenues were +8% in constant currency excluding its recent acquisition of Cerner. What is starting to move the needle is that their cloud businesses now make up more than 30% of total revenue and are growing fast (45% in 3Q22 including Cerner).

In an excellent interview after the results just came out Futurum Research analyst Dan Newman called ORCL a “cloud story” and repeatedly brought the interview back to ORCL’s move into the cloud. I also want to give credit to Barron’s Eric Savitz who first brought ORCL’s reinvention story to my attention with a cover story a year and a half ago.

What makes ORCL the best way to play the could is its cheap valuation. While Amazon (AMZN) and Microsoft (MSFT) are the leaders in cloud computing ORCL is a far cheaper stock. ORCL earned $4.90/share in FY22 and I’m estimating $4.45 for FY23 (based on my bearish macro view). That works out to a very reasonable 17x multiple given the growth of their cloud businesses. My three year price target is $112.

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