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Why Oracle Stock Is Looking Strong Despite Current Market Volatility

Oracle (NYSE:ORCL) doesn’t typically get the same sort of headlines that other tech companies from its era do. Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are more consumer-facing, so their products tend to be in the public eye. Oracle is enterprise, known primarily by IT professionals. While those two companies skyrocketed in value over the past decade — both hitting trillion dollar valuations — ORCL stock merely doubled.

ORCL Stock: Why Oracle Is Looking Strong Despite Current Market Volatility
Source: Jonathan Weiss / Shutterstock.com

However, Oracle found itself in the headlines on Tuesday. An online platform provided by the company is going to be used by the White House to track the effectiveness of unproven coronavirus treatments. In addition, last Friday, ORCL made headlines in financial media, with news that a prominent analyst had upgraded Oracle stock to Overweight, with an increased price target.

Oracle Providing Platform for White House

Companies like Inovio Pharmaceuticals (NASDAQ:INO) are working on a COVID-19 vaccine, but it has yet to reach human trial stage. Even if they are successful, it could be 2021 before a vaccine is widely available. That puts a lot of pressure on the medical community to find an effective treatment for the coronavirus from China in the meantime.

There have been claims of different drugs being used successfully on patients, including chloroquine and hydroxychloroquine, which are traditionally used to treat malaria. The problems are anecdotal evidence and a lack of coordination. 

Oracle is reportedly stepping up, partnering with the White House to provide an online platform to track the effectiveness of drug treatments. Oracle’s software would be used by physicians using the drugs with patients and by university researchers. The Department of Health and Human Services and the Food and Drug Administration are also involved in the project.

Solid Q3 Earnings

Moving from the national spotlight to something more substantial from an investment standpoint, Oracle recently posted solid third quarter earnings. The company beat estimates for earnings and revenue, hitting its highest quarterly revenue growth in two years on the strength of its cloud division. It also announced a $15 billion share buyback program.

InvestorPlace contributor Tom Taulli pointed out that ORCL is relatively protected from an economic downturn: “Oracle has the benefit of highly sticky applications for strategic areas like databases, middleware and ERP. Such technologies are not discretionary for customers.”

Analyst Upgrade for ORCL Stock

On March 20, J.P. Morgan analyst Mark Murphy upgraded his rating on Oracle. Murphy cited a number of factors for the upgrade:

  • Currently trading at roughly 10 times estimated 2021 calendar earnings, ORCL stock is at the “very low end” of its historic range of nine to 19 times earnings.
  • Oracle will benefit from the stickiness of its solutions during an economic downturn.
  • The company’s stock repurchase program will add to per-share earnings.
  • Oracle has avoided investing in private companies, making it less at risk than other tech giants if the value of those companies takes a hit.

Murphy now has ORCL stock rated as “Overweight” instead of “Neutral,” calling it “a relative safe haven within the software sector.” He has also raised his price target to $55 from $51.

Bottom Line on Oracle Stock

We’re facing a time of uncertainty, with the growing likelihood of a recession once the coronavirus threat is beaten. Oracle being a highly visible part of that fight is putting a rare spotlight on the company and could well lead to additional business. 

Add in the company’s Q3 earnings performance, its “sticky” business model, a $15 billion share buyback program, and a high-profile analyst upgrade, and an investment in ORCL stock is worth considering.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.  As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/03/why-oracle-orcl-stock-is-looking-strong-despite-current-market-volatility/.

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