Justin Sullivan
Oracle reports their fiscal Q2 ’24 quarter after the close tonight, with sell-side consensus expecting $1.32 in earnings per share on $13.0 billion in revenue and operating income of $5.57 billion for expected y.y growth of 9%, 6% and 9% respectively.
The last (August ’23) quarter, the stock was hit hard after the software giant reduced this fiscal Q2’s guidance below what the sell-side was expecting, even though operating margin rose about 150 bps y.y.
Here’s Oracle’s margin history since Covid:
Valuation spreadsheet from earnings reports
The $30 billion Cerner acquisition closed during the August ’21 quarter.
IBES data by Refinitiv
This history of Oracle’s EPS revisions shows that with the closure of the Cerner deal (August ’22), EPS estimates started to get ratcheted lower, which is understandable since Oracle has a history of doing these very dilutive deals, and the dilution causes “fully-diluted shares outstanding” to increase, thus reducing EPS.
There is nothing really out of the ordinary happening around Oracle’s stock price, other than the usual pressure of incorporating or consolidating another big acquisition, which always takes time.
Valuation: When Oracle reported their August ’23 quarter last September, the fiscal ’24 cloud growth of 30% was affirmed by management, but it wasn’t clear how much was organic. Trading at 18x EPS for an expected “average” EPS growth rate over the next 3 years of 12%, the stock is not at the upper end of its valuation range, and technically it’s been below its old high pre the Sept ’23 earnings of $125 – $127, for the last 4 months.
At 6x revenue and 17x cash flow, it’s in line with other large-cap tech and software stocks, but as readers would expect, Oracle never really looks truly cheap.
The stock sports a 1.4% dividend yield. If you’re looking for dividend stocks, Oracle is probably not your best candidate. Years ago, I thought as the stock matured it would eventually sport a bigger dollar dividend and yield, but the large acquisitions Oracle’s business model requires, the current debt load, and the fact that free cash flow is typically negative after these big acquisitions means the dividend will never really be a reason to buy the stock, but it certainly doesn’t hurt.
Morningstar, like a number of sell-side analysts, thinks the cloud gap between Oracle and AWS is too big, and is a negative to the Oracle moat. This blog has a fair value for Oracle between $115 – $120, or right around where it’s trading, thus, if we split the difference, Oracle might be worth owning if it falls below $100 per share.
Summary / conclusion: This blog has written about Oracle’s perceived quality issues, most recently last September ’23, but the fact is like the September ’23 article states, the long-term performance of the stock, at least relative to the S&P 500 and what’s probably considered the mega-cap quality standard in Microsoft, over the last 23 years, and this includes the nuclear winter for large-cap technology of 2000 to 2009, Oracle’s long-term performance relative to the S&P 500 is downright envious.
Tonight, after the Q2 ’24 earnings report, the stock could be +/- $10 per share. Trying to game stock direction after earnings reports is far harder than playing the longer game of buy-and-hold. The point is, I have no clue how the stock will respond to tonight’s earnings. No doubt fiscal ’24 guidance will be updated, and maybe more importantly, as an analyst that adds acquisitions to capex when calculating free cash flow, the huge hit to free cash flow from the Cerner acquisition in August ’22 will now fall off, and investors will get a better read on Oracle’s true free cash flow. (Readers might ask why include acquisitions in capex for free cash flow purposes, but for Oracle it’s especially important: as was noted in the above-linked Sept ’23 earnings preview, Oracle’s free cash flow doesn’t always equal net income, which is somewhat unusual for a software stock, and that to me has always spoken to quality of earnings for Oracle, but again, as the performance chart from YCharts show in the Sept ’23 earnings, it’s never really impacted the stock price.)
Prior to the September ’23 earnings report, Oracle saw a number of upgrades to the stock, and it set investors up for disappointment post earnings, particularly with the lowering of guidance for the Nov ’23 quarter. Some of the sell-side analysts are worried about the tough compare versus the November ’22 quarter, too. The sentiment is far more favorable to an upside move after tonight’s earnings given the September quarter’s slide, but take that with a healthy dose of salt.
The fundamental aspect of Oracle’s story is watching what Morningstar says about the gap between Oracle and AWS (and presumably Azure) over time.
None of this is advice or a recommendation, and past performance is no guarantee of future results.
Original Post
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Oracle Reports Tonight: Stock Fairly Valued As Cerner Impacts Margins
- Advertisment - 
Recent Comments
on Ford Blue Cruise: US regulators investigate fatal crashes involving hands-free driving technology
on Arsenal highlighted for spending 26 seconds taking corner v Everton – Sky Sports’ tweet backfires
on Inside Hoda Kotb and Jenna Bush Hager’s ‘amazing’ luxury spring break vacations with their families
on Inside Floyd Mayweather’s Lavish Lifestyle: A Look at His Stunning Car Collection and Private Jet
on In
on If Tom Cruise Ever Gets A Theme Park, Here’s What Movies Should Get Their Own Rides And Attractions
on ‘I Will Immediately Retire From Boxing and Fight Jorge Masvidal…’: Jake Paul Starts 2023 With a Bang
on How The Other Half Fly: VistaJet Goes To Enviable Lengths To Make Air Travel Better For Your Body
on Hollywood Reporter: Tom Cruise negotiated with movie studios over AI before the actors strike began
on Growing number of sports bras, athletic wear found with high levels of toxic chemical, watchdog says
on GM Cruise Setbacks And EV Profitability Concerns: Analyst Lowers Expectations for Future Investments
on Fresno State at Nevada live stream, odds, channel, prediction, how to watch on CBS Sports Network
on Ford Blue Cruise: US regulators investigate fatal crashes involving hands-free driving technology
on Following Exchange With Caitlin Clark At News Conference, Columnist Won’t Cover Indiana Fever Games
on Florida lawmakers introduce bills that would criminalize storming fields, courts at sporting events
on FIU vs. Jacksonville State live stream, how to watch online, CBS Sports Network channel finder, odds
on Erdogan to attend Turkey-Netherlands Euro 2024 quarterfinal amid diplomatic row with host Germany
on East Carolina vs. Tulane basketball game postponed following death of Pirates announcer Jeff Charles
on EA Sports College Football 25, among most anticipated sports video games in history, hits the market
on Dubai International Airport sees 41.6 million passengers in first half of year, more than in 2019
on Dozens of boats cruise the Seine in a rehearsal for the Paris Olympics’ opening ceremony on July 26
on Dozens of boats cruise the Seine in a rehearsal for the Paris Olympics’ opening ceremony on July 26
on Donovan Mitchell will be extra motivated to carry the Cavaliers, plus other best bets for Tuesday
on Disney Cruise Line Announces New Fireworks Show and More Details About ‘Silver Anniversary at Sea’
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on Death toll from Ian, storm-caused flooding crosses 50 people; remnants to dissipate over Virginia
on David and Victoria Beckham so ‘Charmed’ by Tom Cruise They Have His Photos on Display at Their Home
on Dave Portnoy: Taylor Swift’s security should ‘drag Kim Kardashian to jail’ if she attends Eras Tour
on Dallas Cowboys Will “Bring You Nothing But Bad Luck”, Sports Media Vet Warns Luka Doncic’s Mavericks
on Cruise worker accused of stabbing woman and 2 security guards with scissors on ship headed to Alaska
on Cruise guest gets stuck on ‘claustrophobic’ water slide suspended over ocean: ‘That is super scary’
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on “Completely Tormented”: How Tom Cruise Was Almost Cast In The Shawshank Redemption (& Why He Wasn’t)
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on Comparing the Humongous Combined Wealth of Latest Business Partners Lewis Hamilton and Rory McIlroy
on Colorado State vs. New Mexico live stream, channel, prediction, how to watch on CBS Sports Network
on College basketball rankings: Virginia joins preseason Top 25 And 1, ready to contend for ACC title
on College basketball rankings: Kansas helps Big 12 lead conference race for most Top 100 And 1 players
on CBS Sports announces Matt Ryan will join NFL studio show. Longtime analysts Simms and Esiason depart
on Can Tom Cruise Save The Box Office Again With Mission: Impossible – Dead Reckoning? An Investigation
on Cam Newton’s Violent Public Incident Draws Hilarious Reaction From 3x All-Star: “Where Do I Sign Up
on “Bro Is Jogging”: Resurfaced Video of Usain Bolt’s 9.84 Seconds Run, Leaves Sports World in Denial
on Braun Strowman Reportedly Set for WWE Return Abroad on Promotional Tour After 6 Months Out Injured
on Brad Keselowski Feels NASCAR Could Welcome New Manufacturer Soon Amid Martin Truex Jr’s Engine Tests
on Boise State vs. Nevada live stream, odds, channel, prediction, how to watch on CBS Sports Network
on Boise State vs. Air Force live stream, odds, channel, prediction, how to watch on CBS Sports Network
on Big Tech companies will cover travel expenses for employees’ medical procedures, including abortion
on Biden: ‘At this point I’m not’ planning to visit East Palestine, Ohio, after toxic train derailment
on Best places to travel in 2023: National Geographic unveils list of top 25 destinations for next year
on Ask Amy: Should I keep my RSVP simple and just gracefully decline or say I can’t afford the trip?
on As more abortion bans occur, many patients must travel hundreds of miles for care – or be stranded
on Air Force vs. Utah State live stream, how to watch online, CBS Sports Network channel finder, odds
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on A weaker dollar, skyrocketing prices and ‘record’ visitor numbers: Good luck in Europe this summer
on A missile fired by Houthis strikes a US-owned vessel off Yemen in the Gulf of Aden, raising tensions
on A heavy wave of Russian missile attacks pounds areas across Ukraine, killing at least 4 civilians
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on $12M Worth Dawn Staley Sports Pricey Jordans While Witnessing Joel Embiid’s Suffering Against Knicks
on Dozens of boats cruise the Seine in a rehearsal for the Paris Olympics’ opening ceremony on July 26
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on If you’re a frequent traveler, these wrap tops from Aday will revolutionize your on-the-go wardrobe
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on Sports World Hails ‘Superwoman’ Lindsey Vonn for Her Grand Comeback Despite Career-Changing Injury
on How Does Jack Nicklaus Travel? Exploring the Private Jets Owned by the ‘Golden Bear’ Over the Years
on College basketball rankings: Kansas helps Big 12 lead conference race for most Top 100 And 1 players
on A weaker dollar, skyrocketing prices and ‘record’ visitor numbers: Good luck in Europe this summer
on Lamar Jackson: NFC side tipped to be ‘overwhelming’ Super Bowl favourites if they signed Ravens QB
on ICC T20 World Cup 2022: “Love Cricket At All Levels, I’ll Watch Any Cricket, And Love Going There”
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on Joe Manchin and Tommy Tuberville introduce bill on name, image and likeness rules for college sports
on San Mateo County Community College District sues five companies over role in ‘pay to play’ scandal
on If you’re a frequent traveler, these wrap tops from Aday will revolutionize your on-the-go wardrobe
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on Biden to tout bill’s prescription drug prices, energy provisions in pitch to Americans, aide says
on Following Exchange With Caitlin Clark At News Conference, Columnist Won’t Cover Indiana Fever Games
on Inside Out Mini Jawbreaker Puzzle Game from Disney Cruise Line Now Available at Walt Disney World
on Katherine Paprocka allegedly embezzled nearly $600k from school for family vacations, IVF treatment
on Johnny Knoxville Talks Jackass Stunts And How They Compare To Tom Cruise’s Mission: Impossible Work
on Napoli owner admits he ‘knew’ Victor Osimhen would end up at ‘Real Madrid, PSG or one English club’
on Camilla Parker Bowles Revealed the ‘Nicest Thing’ She and Prince Charles Do When They Travel Is Free
on Russian cruise and ballistic missiles kill 4 in Ukraine and Ukrainian rockets kill 2 in Russian city
on Can Tom Cruise Save The Box Office Again With Mission: Impossible – Dead Reckoning? An Investigation
on Boise State vs. Air Force live stream, odds, channel, prediction, how to watch on CBS Sports Network
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on College basketball rankings: Kansas helps Big 12 lead conference race for most Top 100 And 1 players
on Inside Floyd Mayweather’s Lavish Lifestyle: A Look at His Stunning Car Collection and Private Jet
on Cruise guest gets stuck on ‘claustrophobic’ water slide suspended over ocean: ‘That is super scary’
on David and Victoria Beckham so ‘Charmed’ by Tom Cruise They Have His Photos on Display at Their Home
on Boston College vs. Army live stream, how to watch online, CBS Sports Network channel finder, odds
on Big Tech companies will cover travel expenses for employees’ medical procedures, including abortion
on Russian cruise and ballistic missiles kill 4 in Ukraine and Ukrainian rockets kill 2 in Russian city
on A weaker dollar, skyrocketing prices and ‘record’ visitor numbers: Good luck in Europe this summer
on GameFly Sale Offering Nintendo Switch Sports at a Mind-Blowing Price, Don’t Miss the Opportunity!
on Ford Blue Cruise: US regulators investigate fatal crashes involving hands-free driving technology
on San Mateo County Community College District sues five companies over role in ‘pay to play’ scandal
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on The Rev. Al Sharpton to lead protest after Florida governor’s ban of African American studies course
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on Saipan, placid island setting for Assange’s last battle, is briefly mobbed – and bemused by the fuss
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on David and Victoria Beckham so ‘Charmed’ by Tom Cruise They Have His Photos on Display at Their Home
on Iowa State starting RB Jirehl Brock among latest college football players charged in gambling probe
on Biden to tout bill’s prescription drug prices, energy provisions in pitch to Americans, aide says
on Iowa State starting RB Jirehl Brock among latest college football players charged in gambling probe
on The Rev. Al Sharpton to lead protest after Florida governor’s ban of African American studies course
on Sports World Hails ‘Superwoman’ Lindsey Vonn for Her Grand Comeback Despite Career-Changing Injury
on San Mateo County Community College District sues five companies over role in ‘pay to play’ scandal
on Saipan, placid island setting for Assange’s last battle, is briefly mobbed – and bemused by the fuss
on ‘Pokémon Scarlet’ and ‘Violet’ Fan Theories Suggest Legendary Time Travel, Alternate Dimension Plot
on Joe Manchin and Tommy Tuberville introduce bill on name, image and likeness rules for college sports
on Inside the Michael Jordan ‘Air’ movie, plus why NFL, others are buying into the sports film industry
on If you’re a frequent traveler, these wrap tops from Aday will revolutionize your on-the-go wardrobe
on How Does Jack Nicklaus Travel? Exploring the Private Jets Owned by the ‘Golden Bear’ Over the Years
on Hollywood Reporter: Tom Cruise negotiated with movie studios over AI before the actors strike began
on Ford Blue Cruise: US regulators investigate fatal crashes involving hands-free driving technology
on Dozens of boats cruise the Seine in a rehearsal for the Paris Olympics’ opening ceremony on July 26
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on David and Victoria Beckham so ‘Charmed’ by Tom Cruise They Have His Photos on Display at Their Home
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on CBS Sports announces Matt Ryan will join NFL studio show. Longtime analysts Simms and Esiason depart
on Boston College vs. Army live stream, how to watch online, CBS Sports Network channel finder, odds
on Boise State vs. Air Force live stream, odds, channel, prediction, how to watch on CBS Sports Network
on Biden to tout bill’s prescription drug prices, energy provisions in pitch to Americans, aide says
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on ‘Best Intention’: Chris Kirk Has Absolute Trust in Jay Monahan and PGA Tour’s Widely Debated Model
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CBS Sports announces Matt Ryan will join NFL studio show. Longtime analysts Simms and Esiason depart
on Carlos Sainz’s Soccer Fanboy Emerges as Spaniard Shares Defining Moment With This Real Madrid Legend
on Biden: ‘At this point I’m not’ planning to visit East Palestine, Ohio, after toxic train derailment
on ‘Best Intention’: Chris Kirk Has Absolute Trust in Jay Monahan and PGA Tour’s Widely Debated Model
on Ahead of big sports weekend, dispute with Disney leaves millions of cable subscribers in the dark
on A heavy wave of Russian missile attacks pounds areas across Ukraine, killing at least 4 civilians
on 2024 Super Bowl: CBS Sports Network and CBS Sports HQ to combine for 115 hours of weeklong coverage
on 2023 NFL All-Rookie Team: CBS Sports draft expert, former GM unveil league’s best first-year players
on Army vs. Coastal Carolina live stream, how to watch online, CBS Sports Network channel finder, odds
on AL Rookie of the Year Julio Rodriguez Spreads Joy and Sportsmanship to the Youth of Loma de Cabrera
on After UFC Fallout, Conor McGregor Offers a Valuable Piece of Advice to Free Agent Francis Ngannou
on Dubai International Airport sees 41.6 million passengers in first half of year, more than in 2019
on Devout athletes find strength in their faith. But practicing it and elite sports can pose hurdles
on Despite strong Lunar New Year holiday data, consumer spending in China isn’t roaring back just yet
on Dave Portnoy: Taylor Swift’s security should ‘drag Kim Kardashian to jail’ if she attends Eras Tour
on CONCEPT ART: New Details Revealed for Disney Cruise Line Lookout Cay at Lighthouse Point Destination
on “Completely Knocked Me Out”: Rob Lowe Recalls Boxing Match With Tom Cruise On 1983 Brat Pack Classic
on CBS Sports, Serie A announce new TV rights deal; Paramount+ to air over 400 Italian soccer matches
on Cam Newton’s Violent Public Incident Draws Hilarious Reaction From 3x All-Star: “Where Do I Sign Up
on Boston College vs. Army live stream, how to watch online, CBS Sports Network channel finder, odds
on Angel Reese Launches Foundation Dedicated To Empowering Women Through Sports & Financial Literacy
on A weaker dollar, skyrocketing prices and ‘record’ visitor numbers: Good luck in Europe this summer