Oracle (NYSE:ORCL) has a proven history as a long-term growth stock. That growth trajectory accelerated in 2021 — at least until this week. Up to April 20, ORCL stock had posted a 24% gain from the start of the year. However, ORCL has been on a slide, dropping over 6% so far. The slide may have some investors thinking twice about ORCL, but for others, it’s an opening to buy shares on the cheap.
For Oracle, the future is all about the cloud. And that future is looking bright for this Portfolio Grader “B” rated stock.
The current dip in ORCL stock is the market reacting to Oracle missing out a $1 billion Israeli government cloud contract. That follows 2019’s loss in a bid for the U.S. government’s $10 billion JEDI pentagon contract.
You can’t win them all, but Oracle is piling on the cloud customers — even if it has missed several of the more high-profile contracts.
ORCL Stock and Growing Cloud Computing Market
Many people still think of Oracle as a database company headed up by Larry Ellison. True, that was Oracle for decades, but not today. Ellison stepped down as CEO in 2014. Databases are still a key product, but cloud computing is powering the company’s growth these days — including a cloud-based version of its flagship database suite.
In 2020, cloud services and license support accounted for $27.4 billion of Oracle’s $39.1 billion in revenue. The company’s big growth areas were cloud-related.
That’s a good thing, because the cloud computing market is on fire. A study released earlier this year pegged the value of the 2019 global cloud computing market at $321 billion. That’s big. And Oracle is listed as one of the prominent players.
However, the market is projected to reach $1.025 trillion by 2026 with a compound annual growth rate of 18% between 2019 and 2027.
Oracle’s increased focus and prominence in the cloud computing market will be key to ORCL stock maintaining its growth trajectory.
Oracle’s Cloud@Customer Solution
Cloud computing may be all the rage — and the profit engine of the world’s largest e-commerce company — but not everyone is onboard.
There are security concerns about having sensitive data offsite. In addition, having data belonging to multiple parties within a single third party cloud center makes it a big target for hackers. Even if they aren’t after data, a targeted attack to take down a website can impact all companies hosted by that data center.
In a Carnegie Endowment report on the topic of cloud security, a former U.S. National Security Agency official sums up the dismissive approach: “Cloud computing is really just a fancy name for someone else’s computer.”
That’s where Oracle’s Cloud@Customer service comes into play. Launched in 2020 Cloud@Customer promises all the advantages of cloud computing. Low-cost subscription pricing, faster performance, less down-time and no IT staff needed to operate the service. But it does this by running Oracle’s cloud and SaaS apps within the customer’s own data center.
Oracle promises all the advantages of cloud computing, while also “maintaining complete control of your data so you can address data sovereignty, security, and connectivity concerns.”
It’s marketed as a best of both worlds solution. And it has the potential to be a significant contributor to future ORCL stock growth. Even if (especially if) a monumental hack or service disruption should take down a major cloud computing data center.
The Bottom Line on Oracle
Oracle is a long-established tech company that’s showing all signs of pivoting successfully to a cloud-based world. That cloud success and the ongoing demand for cloud services has analysts taking note. Yesterday, Cowen’s J. Derrick Wood boosted his price target to $85, while keeping an “Outperform” rating for ORCL stock. He wrote: “We think the framework for growth acceleration is strengthening as we exit the pandemic.”
Wood also notes that Oracle’s Cloud@Customer service is seeing growing traction among customers.
Analysis like this in an increasingly cloud-centric business world, and it makes a strong case for treating the current dip in ORCL stock as a buying opportunity.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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