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Oracle’s ( ORCL ) quarterly results Monday evening should highlight the club holding’s still-under-the-radar artificial intelligence capabilities. Wall Street sees Oracle earning $1.15 per share on revenue of $12.47 billion for its fiscal 2024 first quarter, according to estimates compiled by LSEG, formerly known as Refinitiv. That would represent 11.65% growth in EPS and around 9% topline growth on a YoY basis. Oracle shares are trading near their all-time high of $126.55 on June 15. The stock is up more than 50% in 2023. ORCL YTD MOUNTAIN Oracle YTD PERFORMANCE “I think Oracle has become the star of the show,” said Jim Cramer, who believes the legacy tech firm’s transformation is putting it in a leadership position in the generative AI race among cloud service providers. The company’s close relationship with Nvidia ( NVDA ) — the dominant AI chipmaker and fellow club name — has helped make Oracle Cloud Infrastructure, or OCI, an increasingly attractive platform for companies working with emerging technologies. Oracle “has strengthened its relationship with Jensen Huang,” Jim said, referring to the Nvidia CEO. Oracle’s cloud-computing business is smaller than the top US hyperscalers: Amazon Web Services (AWS), Microsoft’s Azure and Google Cloud. But OCI is growing like a weed and becoming a more meaningful part of companywide revenue. In the three months ended May 31, Oracle’s cloud infrastructure unit’s revenue rose 76% on a year-over-year basis to $1.4 billion, roughly 10% of the company’s total. Amazon (AMZN), Microsoft (MSFT) and Google-parent Alphabet (GOOGL) are also club stocks. OCI’s performance in the soon-to-be-reported fiscal first quarter – along with management’s commentary on its future AI opportunity – should drive post-earnings trading in Oracle’s stock, Barclays said in a note to clients on Thursday. In that regard, Oracle has a favorable setup as OCI is likely to post a “healthy beat” compared to expectations, analysts wrote. Barclays upgraded Oracle to a buy-equivalent rating on Tuesday, citing a multi-year growth story rooted in OCI and other key Oracle businesses. Analysts there also raised their stock price target to $150 per share from $126. Analysts at UBS struck a similar tone last week when they upgraded Oracle stock to buy. In a note to clients, the firm argued that if Oracle’s much larger software and traditional database businesses at least hold steady, additional cloud-computing momentum should keep Oracle shares higher. UBS also raised its price target on Oracle to $140 per share from $120. UBS has become more confident that Oracle has “taken a low-interest edge” to access Nvidia’s leading graphics processing units (GPUs) and the way OCI’s architecture allows clusters of those GPUs to operate efficiently, the analysts wrote. This one-two punch “is enough to attract new customers and increase OCI usage,” UBS said, especially as demand for Nvidia GPUs currently outstrips supply as seen in Nvidia’s latest stellar earnings report. Wall Street analysts have become more bullish on Oracle — thanks to new buy ratings and price target increases from Barclays and UBS — but the company is far less beloved than other club holdings that have asserted themselves as generative AI leaders. Jim believes Oracle is also in that camp. Only 52% of analysts have a buy-equivalent rating on Oracle shares, compared with 94% for Nvidia and 86% for Microsoft, a close partner of the startup that created ChatGPT, according to FactSet. Semiconductor firm Broadcom ( AVGO ), another AI-exposure play and club name, has a buy-equivalent rating from three-quarters of analysts covering the company, according to FactSet. Of course, an analyst’s rating on a stock includes a variety of factors — and in Oracle’s case, AI-linked revenue is a small part of its topline. Still, the fact that 15 of the 33 analysts covering Oracle have a neutral rating on the stock lends credence to the idea that its AI opportunity is in the early stages, with incremental buyers lurking in the wings as the story unfolds. Moreover, at less than 22 times forward earnings, Oracle is fairly valued relative to peers — not to mention the market at 18.7 times the S & P 500. Bottom Line We’re already believers in the story, prompting us to initiate the position last month below $116 per share. We expect that, over time, Oracle’s AI execution and growing cloud share will attract new investors to the stock and convince more analysts of its potential. Another strong Monday earnings report will likely help do just that. (Jim Cramer’s charitable trust is long ORCL, NVDA, MSFT, AMZN, GOOGL and AVGO. See here for a complete list of stocks.) As a member of the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim. doing business Jim waits 45 minutes after a trade alert is sent before buying or selling stocks in his charitable trust portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade alert before executing a trade. The above Investing Club information is subject to our disclaimer, our terms and conditions and privacy policy. No fiduciary obligation or duty shall exist or be created by your receipt of any information provided in connection with the Investment Club. No specific results or profits are guaranteed.
An exterior view of the Oracle Field Office on Wilson Boulevard in Arlington, Virginia on October 18, 2019.
Tom Brenner | Reuters
of Oracle (ORCL) quarterly results on Monday evening should highlight Club Holding’s still-under-the-radar artificial intelligence capabilities.
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