Time to Part Ways with Oracle

by Louis Navellier | April 6, 2012 9:55 am

Time to Part Ways with Oracle

oracle building 630 300x225 Time to Part Ways with Oracle[1]Louis Navellier posts his” Stock of the Day” each and every day on his Facebook[2] page. Today’s stock is Oracle.

Let’s take a look:

Recommendation: Sell

Lately, Oracle (NASDAQ:ORCL[3]) has been embroiled in lawsuits with major tech players Google (NASDAQ:GOOG[4]) and Micron Technology (NASDAQ:MU[5]). Let’s take a moment and see what the fuss is all about and whether it’s worth buying into ORCL.

Company Overview: Oracle Corp. is one of the nation’s largest hardware and software companies. Notably, the company has been around since 1977—so it has kept pace with much of the computer revolution. Over the years, the company has rolled out wave after wave of successful database management systems and has managed to capture the third-highest software sales. Oracle is also known for its enterprise resource planning software, its customer relationship management software as well as its supply chain management software. The company currently employs 108,000 worldwide.

Industry Breakdown: There are currently 117 companies in the Application Software industry. Of those, Oracle is second largest in terms of market cap. In addition, the company’s 0.80% dividend yield is the eighth best and its return on equity (24%) is 14th highest. The company’s earnings growth also falls in the top quartile.

However, there is room for improvement in terms of sales growth (73rd) and its long-term growth rate (56th). Oracle’s main competitors are International Business Machines Corp. (NYSE:IBM[6]), Microsoft (NASDAQ:MSFT[7]) and SAP (NYSE:SAP[8]). Oracle is neck-in-neck in terms of operating margin and gross margin with Microsoft and SAP, but outpaces IBM.

Litigation Situation: On Tuesday, Micron Technology settled a lawsuit with Oracle over allegations that Micron artificially inflated microchips prices. According to Micron management, this settlement is forecast to decrease the company’s bottom line by $58 million. Oracle has also accused four other chip makers of price tampering.

Additionally, Oracle is battling Google through an intellectual property lawsuit that has been in the works since 2010. In a nutshell, Oracle alleges that the Android’s mobile operating technology infringes Oracle’s Java patents. In response, Google offered to pay up $2.8 million in damages as well as 0.5% of Android revenue on a certain patent. However, Oracle has refused this offer, and the two companies are currently at a settlement impasse.

Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader[9] ratings system. This stock has suffered a significant decline in the past twelve months; this time last year, the stock earned a B overall. Since then, the company has dipped in terms of its sales growth and earnings momentum—its earnings growth, cash flow and return on equity actually remain strong. What really keeps this stock down is its depressed level of buying pressure; it has been steadily tapering off for the past six months. Overall, this is a D-rated stock.

Bottom Line: This stock is a sell, so if you have shares of ORCL, I suggest you find a good opportunity to part ways with them.

Sound Off: What do you think about ORCL? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2012/02/oracle-building-630.jpg
  2. Facebook: https://www.facebook.com/navgrowth?sk=app_176217385757369
  3. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  4. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  5. MU: http://studio-5.financialcontent.com/investplace/quote?Symbol=MU
  6. IBM: http://studio-5.financialcontent.com/investplace/quote?Symbol=IBM
  7. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  8. SAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=SAP
  9. Portfolio Grader: http://www.navelliergrowth.investorplace.com/portfolio-grader/

Source URL: http://investorplace.com/2012/04/time-to-part-ways-with-oracle-orcl-mu-ibm-goog-msft/
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