1 Stunning Stock Set To Join Magnificent 7

While Microsoft, Alphabet and Amazon garner the headlines, Oracle Corporation (NYSE: ORCL) has quietly become one of the fastest-growing cloud infrastructure companies. Its cloud business grew by 47% year-over-year in the latest quarter and that rate of growth puts it firmly on the radar of investors looking for the next stock to join the Magnificent 7 grouping.

Oracle has long been a standout enterprise in Silicon Valley but for years it didn’t budge much at all in share price, so is now the time to get excited by it?

Key Points

• Oracle’s cloud business saw a 22% revenue increase year-over-year to $9.4 billion, driven by its focus on autonomous and integrated cloud services.
• Oracle reported an 18% revenue rise to $13.8 billion and a 10% increase in net income to $3.3 billion.
• With cloud services making up over 60% of revenues and key partnerships with Microsoft and Salesforce, Oracle is poised for further growth.

Cloud Business Is The Growth Engine

Oracle’s Cloud Infrastructure and Fusion Cloud applications are clearly now the cornerstone of its growth strategy. The statistics make it clear that bullish momentum is strong for cloud services and license support with revenues climbing by 22% year-over-year to $9.4 billion in the latest quarter.

Management’s focus on autonomous cloud services, integrated cloud applications, and industry-specific cloud solutions has been received well by businesses looking for scalable, secure, and cost-effective cloud solutions. But what is it that makes Oracle stand out against stiff competition?

One of Oracle’s key differentiators is its autonomous database that relies on machine learning to automate routine database maintenance tasks and thereby lower operating costs.

The company’s unique value proposition has attracted noteworthy customers, including Zoom and 8×8, both of whom rely on Oracle’s cloud infrastructure.

As the company realizes product-market fit and customer satisfaction grows, the financials are starting to really shine.

Oracle Is Finally Growing Fast

Oracle surprised many casual observers in recent quarters when revenues soared by 18% to $13.8 billion. Net income also rose by 10% to $3.3 billion highlighting the company’s efficiency in dropping sales to the bottom line. That’s in no small part due to the operating margin which is a very healthy 44%.

Cash flows from operations have risen also to $15.5 billion for the fiscal year and the balance sheet remains in pristine condition with $45.3 billion in cash and marketable securities on the books. All that is translating to an ever wider moat for Oracle that also includes an extensive product portfolio and strong customer relationships.

Oracle has long been famous for its suite of enterprise software applications, including Enterprise Resource Planning, Human Capital Management , and Customer Relationship Management, a combination that makes it very difficult for competitors to easily replicate.

The company’s partnerships with leading technology companies, whether Microsoft or Salesforce, means it can offer hybrid cloud solutions that allow customers to leverage their existing IT investments while transitioning to the cloud. All in all, that translates to a serious competitive advantage against up-and-coming disruptors.

Will Oracle Join the Magnificent 7?

With fast growth in cloud infrastructure and applications coupled with its strong financial performance, Oracle very much has the potential to join the Magnificent 7 soon. After all, the fastest growing segment, cloud services, now accounts for over 60% of total revenues.

The company’s high operating margin and strong cash flow generation only serve to spotlight quite how efficient Oracle’s business model really is in delivering shareholder value.

And its partnerships with industry leaders, such as Microsoft and Salesforce, provide significant growth opportunities in the hybrid cloud market.

When you put it all into the mix, you end up with a company that has the potential to power higher, but by how much?

A dividend multi-stage model pegs fair value for Oracle at $164 per share, though it must be stated that analysts are not so bullish and have intrinsic value pegged at $148.92 per share.

A final note in favor of Oracle is that the 1.15% dividend yield that isn’t reason enough to buy it but offers a little support to holding the stock over the long-term.