Alert: 38% Upside In Super Boring Stock
Investment Alert: Buy Oracle (ORCL) Under $120
Disclaimer: Investment Alerts have a medium to long-term time horizon. These do not constitute financial advice and you should contact a financial advisor before deciding whether it is appropriate for your individual circumstances.
Larry Ellison ranks among the richest men in the world thanks to the roaring success of the company he founded in 1977, Oracle. These days Oracle has a market cap of around $318 billion, generates almost $50 billion in revenue annually and posts net income of close to $8 billion.
When the company pays out $1.60 in dividends annually, Larry, who owns 1.15 billion shares receives an astonishing $1.84 billion in passive income.
But who cares about Larry, how can you get a piece of the pie? Read on.
Key Points
- Oracle is best known for its database software, but it has been investing heavily in artificial intelligence in recent years.
- This investment has been a success, with AI now representing as much as 22% of Oracle’s revenue.
- The company’s financials are strong, with revenue growth accelerating and dividends hiked consecutively for the past 9 years.
Oracle’s Big Move to Artificial Intelligence
Oracle is best known for its database software, but in recent years, it has been investing heavily in artificial intelligence. As business processes lend themselves ever more to automation, Oracle, with its established roster of clients, can capitalize on AI adoption to automate business tasks more efficiently.
From AI chatbots to inventory management and customer service, Oracle can roll out a product suite to an entrenched client base quickly and at scale that is the envy of up-and-coming startups.
The initiatives have been a roaring success with artificial intelligence now representing as much as 22% of the firm’s revenues. With such rapid growth already evident, the future is bright for Oracle to rise significantly higher.
Indeed as Oracle leverages its AI development to address stubborn challenges in healthcare from treatment to drug discovery, the market opportunity for the firm has grown enormously. So too, the financial services industry is a ripe opportunity as detection and prevention of fraud increasingly takes center stage.
Financials
What jumped off the page when we started to dig through Oracle’s financials was how the company’s revenue growth has been accelerating. For a company that’s been around for over 45 years that is an impressive feat.
It’s also hiked its dividend consecutively for the past 9 years and historically the share price does not exhibit a whole lot of volatility so it acts as a magnet for more conservative-minded investors.
It seems that Oracle is the best of both worlds in many respects. It is both an old-school tech company with massive cash flows and consistently solid earnings, and its top line is demonstrating the growth that an investor wants to see to get excited about the future.
The company’s market opportunity in AI is the perfect catalyst that could catapult the firm to higher highs. Our analysis reveals 38% upside to $161 per share using a 10 year discounted cash flow forecast analysis but the reality could be even more lofty.
Some speculate Oracle even has the potential to join the rarified air of Amazon, Apple, Alphabet and Tesla with a trillion dollar market cap. Time will tell. For now, patient investors can enjoy a 1.6% dividend yield and the confidence that this company is a cash cow with a bright future.
