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Oracle Looks Bright After Q4 Earnings: Should You Hold?

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Oracle Corporation (ORCL - Free Report) has been a favorite with investors, courtesy of its strong fundamentals, growing cloud market share and positive earnings estimate revisions.

Let’s now delve deeper and take a look at some of the aspects aiding the company’s performance.

Key Drivers

Oracle delivered stellar fourth-quarter fiscal 2018 results. Non-GAAP earnings of 99 cents per share comfortably beat the Zacks Consensus Estimate of 94 cents. Moreover, revenues of $11.260 billion surpassed the Zacks Consensus Estimate of $11.195 billion.

Earnings increased 11.2% from the year-ago quarter. This can primarily be attributed to 2.9% growth in revenues which was toward the higher range of management’s guidance of 1-3%.

Oracle’s top-line growth benefited from the ongoing cloud-based momentum. Total cloud services and license support revenues (60% of total revenues) for the quarter advanced 7% (5% in constant currency) to $6.77 billion. We believe that the company’s growing cloud market share will continue to drive top-line growth in the foreseeable future.

Oracle Cloud Platform

Oracle recently announced the accessibility of its next-generation Oracle Cloud Platform services. The move is aimed at providing required programmability, performance and flexibility for rapid service deployment in the cloud economy.

The latest addition to its cloud platform reflects Oracle’s focus on expanding cloud computing product portfolio inorganically. The strategy will enable the company to scale up cloud operations much faster. Through product expansion, it hopes to challenge the dominant position of Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) in both the PaaS and IaaS.

The overall growth expectation for the public cloud computing services market is very bullish. According to Gartner, the worldwide public cloud services market was projected to grow 18% through 2016 to $246.8 billion in 2017. This figure will increase to $383.3 billion by 2020.

IaaS is projected to be the highest growth service driven by improvement in PaaS along with the massive adoption of artificial intelligence (AI), analytics and the Internet of Things (IoT). IaaS is anticipated to grow from $25.29 billion in 2016 to $71.55 billion in 2020.

Exponential growth in the amount of data, complexity of data formats and the need to scale resources at regular intervals compelled several companies to turn to cloud computing vendors. Consequently, considering the growing need for cloud-based applications and software, we expect Oracle’s investments in this space to boost long-term growth.

Upward Estimate Revisions

In the last 30 days, the Zacks Consensus Estimate for Oracle's current year witnessed upward revisions. For the current year, the Zacks Consensus Estimate is pegged at $3.41 per share, up from earnings of $3.33 per share.

Positive Earnings Surprise History

Oracle has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, recording a positive average earnings surprise of 6.3%.

Further, it has a long-term expected EPS growth rate of 9.8%.

Oracle Corporation Price

Zacks Rank and Key Picks

Oracle currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is NVIDIA Corporation (NVDA - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA has long-term earnings per share growth rate of 10.3%.

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