Oracle Corp. was late to the game in its cloud efforts, according to one analyst, but its recent work to catch up could help its stock get rewarded.
Edward Jones analyst Logan Purk upgraded Oracle shares
ORCL,
to buy from hold Monday, noting that Oracle has “aggressively pushed into offering cloud services,” a move that could drive better sales growth. Customers who transition to the cloud end up spending four to five times more on the company’s services, according to Purk.
“We think Oracle can be successful, given its wide product offerings that help with mission-critical functions, such as resource planning, record keeping and human resources, as well as its leading database platform,” Purk wrote. “With the cloud-market opportunity approaching $1 trillion, we think there is ample opportunity for the company to succeed.”
Shares of Oracle were up 0.6% in morning trading Monday.
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Purk also sees the potential for an improved profit picture, highlighting that Oracle now has completed a full integration of its Cerner acquisition, while also reducing its overall cost structure.
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“In our view, the strong sales growth opportunity paired with the potential for profit margin improvement presents a compelling long-term investment,” he said. “With shares trading at a discount to peers, we do not believe the stock reflects our optimism.”
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