Oracle Corp. (NASDAQ:ORCL), renowned for its databases and cloud solutions, faced a setback on Dec. 12 when its stock plunged by 12.4%. This drop was prompted by a revenue miss in the company’s fiscal second-quarter results and a cautious outlook that unsettled investors.

In the midst of Oracle’s robust but slightly underwhelming cloud growth, the company is navigating a period of heightened volatility. This scrutiny is part of the broader tech sector’s assessment in 2024, as investors seek signs of sustainable growth amidst lingering economic uncertainties.

Given this backdrop, it’s prudent to consider whether ORCL’s recent sharp pullback presents a potential buying opportunity. Let’s delve into the stock’s valuation, growth forecasts, and analysts’ expectations.

Oracle Stock: Performance and Valuation Metrics

Oracle, a major player in the tech industry since 1977, provides cloud computing, databases, and software solutions to a global customer base exceeding 400,000 in over 175 countries. The stock boasts a market cap of over $287 billion.

Despite challenges since Q2 earnings were released, marking the stock’s second consecutive post-earnings bear gap after a Q1 disappointment, ORCL still retains a 19.6% gain over the past 52 weeks.

Notably, the drops in ORCL’s stock were tied to concerns over top-line misses and cloud growth in both Q1 and Q2 of FY 2024, despite beating Wall Street’s earnings-per-share estimates.

ORCL offers a 1.53% dividend yield, backed by nine consecutive years of growth. With a modest payout ratio of 29% and healthy free cash flow, the company has room to reward shareholders through dividend hikes and share buybacks.

The current PEG ratio of 1.37 suggests ORCL is reasonably priced for expected earnings growth. Additionally, its valuation at 15.6x cash flow is a discount compared to most tech sector peers.

Analyst Expectations for ORCL

Analysts anticipate an 8.5% increase in adjusted earnings per share (EPS) for fiscal year 2024, coupled with a 7% revenue increase. Looking ahead to fiscal 2025, Wall Street projects 12% bottom-line growth and 8.3% top-line growth.

While ORCL’s growth prospects may not match some other AI-linked tech names, its forward revenue and EPS projections surpass tech sector medians. Combined with its attractive valuation and appealing dividend yield, ORCL remains a stock worth considering.

Analysts, in consensus, rate the stock as a “moderate buy,” with 25 recommendations in total. Out of these, 12 suggest a “strong buy,” while 13 recommend a “hold.” The mean target price is $126.38, reflecting a 22% premium to current levels.

For investors who can temper their expectations regarding cloud growth, Oracle’s recent pullback may indeed be a dip worth considering. With robust cash flow, a reliable dividend payout, and consistent earnings growth, ORCL presents itself as a potential value pickup in the current market scenario.

Featured Image: Unsplash

Please See Disclaimer