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Why did Oracle shares gain 15%?

Oracle Corporation Shares (New York stock market : ORCL) jumped more than 15% in Monday’s extended trading session after the US multinational computer technology company reported upbeat results for the fourth quarter of fiscal 2022 (ended May 31).

The company’s quarterly pace has raised investor confidence. Strong cloud infrastructure activity contributed to results, beating analysts’ expectations.

Results in detail

Oracle reported fourth-quarter adjusted earnings of $1.54 per share, significantly beating Street’s estimate of $1.38 per share. Interestingly, the results exceeded the company’s high-end forecast of $0.20 per share.

Additionally, total revenue of $11.8 billion was up 5% year-over-year and beat analysts’ expectations of $11.65 billion.

Cloud services and licensing support revenue jumped 3% year-on-year to $7.6 billion, while cloud licensing and on-premises licensing revenue grew 18% to $2.5 billion of dollars.

Additionally, total cloud revenue (IaaS plus SaaS) increased 19% to $2.9 billion, while Fusion ERP cloud revenue and NetSuite ERP cloud revenue increased 20% and 27% , respectively. Cloud infrastructure revenue jumped 36%.

Adjusted operating margin was 47%, compared to 49% in the prior year quarter.

For fiscal 2022, Oracle posted adjusted earnings of $4.90 per share, up 5% year-over-year. Additionally, total revenue of $42.4 billion jumped 5%.

Capital deployment

A quarterly cash dividend of $0.32 per common share has been announced. This dividend will be paid on July 26, 2022 to shareholders of record on July 12.

Official comments

In response to the fourth quarter results, Oracle CEO Safra Catz said, “We believe this spike in revenue growth indicates that our infrastructure business has now entered a phase of hyper-growth. Combine a strong growth rate in our cloud infrastructure business with the recently acquired Cerner applications business, and Oracle is in a position to deliver explosive revenue growth in the coming quarters.

Looking ahead, the company expects the cloud business to grow more than 30% in constant currency in fiscal 2023, reflecting double-digit organic growth in cloud services revenue and license medium.

For the first quarter of fiscal 2023, Oracle expects total revenue, including Cerner, to grow 20% to 22% in constant currency and 17% to 19% in USD. Adjusted earnings are expected to be between $1.09 and $1.13 per share in constant currency and between $1.04 and $1.08 per share in USD.

The Taking of Wall Street

Following the results, JMP Securities analyst Patrick Walravens maintained a Hold rating on Oracle.

The rest of the street is cautiously bullish on the stock, with a moderate buy consensus rating based on four buys and eight takes. The average Oracle price target of $90.30 implies an upside potential of 40.98%. The shares have lost 21.32% over the past year.

Hedge funds

TipRanks’ Hedge Fund Trading Activity Tool shows that sentiment in Oracle is currently very positive, as the cumulative change in holdings across the 31 active hedge funds last quarter was an increase of 5.3 million shares.

Conclusion

In an era of fast-paced digital transformation, the strength of Oracle’s cloud business reflects the company’s long-term potential. Based on a positive signal for hedge funds, strong earnings, consistent capital deployment activity and continued investment by the company, investors may consider adding the stock to their portfolio.

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