Should you buy Oracle (ORCL) stock ahead of next week’s earnings?

Oracle Corporation (NYSE: ORCL) has successfully transformed from a software company into a cloud services provider and looks well-positioned to participate in the unfolding cloud transformation. The enterprise-software giant is growing the business by extending its offerings to new regions and through strategic acquisitions.  

When stock markets went into selloff mode a few months ago, Oracle was not spared. The stock has lost about 30% since peaking in the final weeks of last year. Going by experts’ views, there is a strong chance of things improving and the stock recouping most of the losses by mid-2023. At the current lows, the valuation looks favorable and is probably the lowest in the software services segment. The stock is an ideal option for long-term investors looking to hold for a few years.

MySQL Leads

The Santa Clara-based tech firm owes its strong revenue growth to the shift to the cloud-based business model, Recently, the company completed the development of the multi-cloud version of its MySQL HeatWave open-source database, which is significant for being the only high-performance, in-memory query accelerator currently available. It is expected to give tough competition to Snowflake and Amazon.com’s (NASDAQ: AMZN) MySQL called Aurora.

From Oracle’s Q3 2022 earnings conference call:

“As we’ve said many times before, we’re committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, and prudent use of debt and the dividend… We’ve paid out dividends of $3.5 billion over the last 12 months, and the Board of Directors again declared a quarterly dividend of $0.32 per share. Our business is strong as our fast-growing cloud business continues to become a larger proportion of the overall business.”

Q3 Outcome

Oracle’s third-quarter earnings report was special for not-so-good reasons – earnings missed analysts’ estimates for the first time in around five years. However, the bottom-line performance improved steadily and earnings reached $1.13 per share during the quarter, though it was down 3% from last year. Meanwhile, revenues advanced by 4% to $10.5 billion. On a constant-currency basis, third-quarter revenues grew at the fastest pace since the company shifted to Cloud.

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Oracle Corporation Q3 2022 Earnings Call Transcript

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Oracle this week closed the acquisition of medical-records company Cerner Corporation (Nasdaq: CERN), a deal that is expected to transform healthcare delivery by giving medical professionals access to modern healthcare information systems. It would help the company expand its market beyond the current areas of expertise like banking and insurance.

What’s in Store

In the near term, Oracle’s overall performance would likely be affected by economic uncertainties and geopolitical issues. At the same time, the company stands to benefit from its aggressive investments in Cloud as enterprises spend heavily on digital transformation and prepare their businesses for remote/hybrid work.

The company is gearing up to publish fourth-quarter results on June 13 after the closing bell, amid estimates for an 11% drop in earnings to 1.37 per share on revenues of $11.7 billion. Oracle’s stock retreated from recent highs and slipped below the $100-mark. It traded lower on Wednesday afternoon, extending the weakness experienced in the previous sessions.