Is It Time To Buy This Tech Company Ahead Of Earnings?

Photo Credit: Nick Fisher

Oracle Corporation (ORCL) Information Technology - Software | Reports June 16, After Market Closes

As we close the door on first quarter earnings another opens when Oracle reports its FQ4 2016 on Thursday, one of the first reports of the season. Oracle is coming off a better than expected third quarter in which they beat on the bottom line but missed sales estimates. The continued transition from licensing, where revenues are booked upfront, to a cloud subscription model, where it is realized month to month, will hurt top line growth as witnessed this past quarter.

The Estimize consensus is looking for earnings per share of of 82 cents on $10.49 billion in revenue, $30 million higher than Wall Street on the top line. Compared to a year earlier, this reflects a 5% increase in earnings and 2% loss in sales. Fortunately the stock typically doesn’t move during earnings season, so meager growth won’t do too much harm. 

Oracle’s transition to cloud computing in its Saas, PaaS and Big Data divisions has been nothing but promising. While the company enjoys a leading position in enterprise and database management systems, they are also gaining ground in the rapidly growing cloud sector. Cloud computing continues to be one of the fastest growing sectors in technology and that has benefitted Oracle. Since the beginning of the year, Oracle has made significant advancements in the cloud business and most recently launched its Oracle PartnerNetwork Cloud program which has already received rave reviews. In light of the cloud transition, licensing revenue has declined 9-10% in the past two quarters. Despite a dedicated focus on cloud computing, it won’t be smooth sailing for Oracle. The software provider is operating in a top heavy industry, facing competition from the likes of Google, IBM and Amazon Web Services.

Meanwhile, Oracle just lost it’s multi billion dollar lawsuit with Google over copyright infringement. The dispute is related to claims Google’s Android operating system illegally used Oracle software. The company will now have to deal with the downward pressure from legal fees and related expenses.