Oracle stock is poised for the upside, get ready for the next surge

Oracle Co. NYSE: ORCL is a giant in the computing and technology industry that originally started as a leader in relational databases in the 1980s. The company has evolved into an enterprise software giant and a major cloud computing services provider. Its latest quarterly results sent shares straight to new all-time highs, underscoring its ability to be a nimble giant and stay ahead of secular trends like artificial intelligence (AI), cloud computing and software suites corporate and TikTok.

Oracle reported that leading AI innovators such as Modal, Suno, Twelve Labs, and Together AI have flocked to its Oracle Cloud Infrastructure and OCI Supercluster to train and infer next-generation AI models.

Evolution from a perpetual license to a subscription model

Oracle’s revenue structure has also evolved from license-based products to subscription-based services. They have embraced the benefits of steady, predictable cash flow that emphasizes a subscription model over a product-based perpetual licensing model.

A subscription model, also known as a pay-as-you-go model or pay-as-you-go model, is easier for customers to onboard due to lower startup costs. That’s why companies like it Pure Storage Inc. New York Stock Exchange: PSTG, C3.ai Inc. NYSE:AI AND UiPath Inc. NYSE: PATH have migrated to the pay-as-you-go/subscription model.

A perpetual licensing model requires a large upfront payment for the software license with maintenance and upgrade costs accompanying the license. Since the licensing model is capital-intensive and front-loaded, many companies are “stuck” even if the software sucks since they sunk so much into it, to begin with. In contrast, a subscription model makes it easier to switch providers.

Service with a smile

Oracle offers services, many services. They offer database as a service (DBaaS), software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS). Its cloud computing segment continues to thrive as the artificial intelligence boom has fueled insatiable demand for computing, storage and networking services. Oracle has a reputation and long history of stability that encourages customers to follow them over a smaller, younger competitor. This enables network effect and additional smooth cross-selling of services.

Barbarians at the door

Oracle is not without competition from the likes of Microsoft Co. NASDAQ:MSFT AND International Business Machines Inc. New York Stock Exchange: IBM in the database market, Salesforce Inc. New York Stock Exchange: CRM in the customer relationship management (CRM) software market, e Amazon.com Inc. NASDAQ: AMZN AND Alphabet Inc. NASDAQ:GOOGL in the cloud computing segment.

Winning is not enough. Others must fail.

Oracle co-founder Sir Larry Ellison was known for this ruthless approach to business. Ellison adopted Genghis Khan’s philosophy that it is not enough to win, but others must fail.

Case in point: When Oracle attempted a hostile takeover of Peoplesoft Inc., it offered a price lower than what the stock was trading at. Peoplesoft scoffed at the idea and fought tooth and nail to thwart a hostile takeover.

Oracle has announced that it will begin offering identical PeopleSoft services. This had an immediate impact on Peoplesoft as new potential customers delayed accessing PeopleSoft, knowing that Oracle was entering the space. Since Oracle was the giant 800-pound gorilla, concerns about Peoplesoft’s stability and longevity were called into question.

Ultimately, this starved PeopleSoft’s operations and after a year-long battle that crushed PeopleSoft’s stock in the process, shareholders wilted and accepted the acquisition. Check the heat map of the sector on MarketBeat.

Stable and able to grow.

On March 11, 2024, Oracle reported fiscal third-quarter 2024 EPS of $1.41, beating consensus analyst estimates of $1.38 by 3 cents. Revenue rose 7.1% year over year to $13.28 billion, missing consensus estimates of $13.29 billion.

Monster cloud metrics

Oracle reported double-digit growth across all of its cloud segments. Total remaining performance obligations (RPOs) increased 29% to $80 billion, thanks to new “large” cloud infrastructure contracts signed in the quarter. Cloud revenue, which includes IaaS and SaaS, increased 25% year-over-year to $5.1 billion. Cloud Infrastructure (IaaS) generated revenue of $1.8 billion, up 49% year-over-year. Cloud application (SaaS) revenue increased 14% year over year to $3.3 billion. Fusion Cloud’s Enterprise Resource Planning (ERP) SaaS service increased 18% to $800 million. NetSuite Cloud ERP SaaS grew 21% to $800 million.

Oracle CEO Safra Catz commented, “We expect to continue to receive large contracts by reserving cloud infrastructure capacity because demand for our Gen2 AI infrastructure substantially exceeds supply, even as we open new cloud data centers and expand existing ones very, very quickly.” Cruz continued: “We expect that 43% of our current $80 billion in remaining performance obligations will be recognized as revenue over the next four quarters and that our Gen2 Cloud Infrastructure business will remain in a hypergrowth phase – growing 53%. % in the third quarter – for the following period. foreseeable future.”

Oracle analyst ratings and price targets I’m on MarketBeat. The titles of Oracle’s competitors and competitors can be found with MarketBeat Stock Screener.

Daily mug template

The daily candlestick chart on ORCL illustrates a cup pattern that may peak to form a handle. The cup lip line formed a high of $126.46 on September 11, 2023. The shares continued to fall to a low of $98.88 on December 13, 2023, before rising to $114.13 in fiscal third quarter 2024 earnings report.

The solid report sent the stock rising above the cup lip line, eventually forming a new swing and all-time high at $132.77 on March 21, 2024. The daily relative strength index (RSI) fell below the band 70. The pullback support levels are at $123.47, $117.64, $111.76, and $106.50.

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