Oracle Corporation: This Could Drive ORCL Stock 30% Higher

ORCL StockOracle Corporation (NASDAQ:ORCL) stock recently introduced several infrastructure-as-a-service (IaaS) offerings to its “Cloud Platform” to strengthen its competitiveness in cloud computing, which is currently dominated by, Inc. (NASDAQ:AMZN).

Oracle boasted that its new IaaS offerings such as the “Oracle Bare Metal Cloud Services” and the “Oracle Ravello Cloud Service” deliver “unparalleled choice, performance, and flexibility.” (Source: “Oracle Transforms the Cloud Infrastructure Market,” Oracle Corporation, September 19, 2016.)

The company also introduced a new database-as-service (DBaaS), which is described by Oracle Executive Chair and Chief Technology Officer Larry Ellison as 20 years ahead of Amazon’s databases.

Oracle could increase its market share in cloud computing and ORCL stock will likely trade higher if the new offerings are proven to be game changers that accelerate its growth and profitability.


ORCL Stock: New Cloud Offerings are Faster and Less Expensive

According to the company, its Oracle Bare Metal Cloud Services include servers that are 11.5 times faster and 20% cheaper than the fastest solution offered by competitors, and they provide high-performance DBaaS, network block storage, object storage, and virtual private network (VPN) connectivity. The company also delivers a secure, private, and high-performance software-defined virtual cloud network (VCN) that seamlessly inter-operates with other Oracle Cloud Platform offerings.

Accenture Plc (NYSE:ACN) and Data Stax are among the companies already using Oracle Bare Metal Cloud in their infrastructures, and they are happy with its performance and scalability.

Oracle Cloud Ravello Service is the first of its kind in the industry that allows organizations to run VMware and kernel-based virtual machine (KVM) workloads in the public cloud without any changes. The service also enables enterprises to have full L2 and L3 networking flexibility in the public cloud.

ORCL Stock: More choices than Amazon?

About two weeks ago, during the company’s OpenWorld event in San Francisco, Larry Ellison showed that the performance of the Oracle DBaaS is 105 times faster for analytics workloads, 35 times faster for online transaction processing (OLTP), and 1000+ times faster for mixed workloads than Amazon’s DBaaS. (Source: “Oracle Beats Amazon Web Services in Head-to-Head Cloud Database Comparison,” Oracle Corporation, September 20, 2016.)

“Oracle’s new technologies will drive the Cloud databases and infrastructure of the future,” said Ellison. He added that Amazon is decades behind in every database area that is critical.

Ellison noted that “Amazon Aurora” is missing important OLTP features such as scalable read-write clusters, parallel structured query language (SQL) and the ability to replicate encrypted databases. “Amazon Redshift” does not have critical analytics features such as table partitioning, materialized views, support for rich data types, nor sophisticated query optimization. Ellison emphasized that Oracle already had these capabilities 20 years ago.

He added that Amazon’s databases are more closed than International Business Machines Corp. (NYSE:IBM) mainframe databases and are not compatible with existing enterprise database applications—such as Oracle, “DB2,” SQL server, and “Teradata”—which forces organizations to throw away decades of on-premise investments.

Ellison pointed out that customers have no choice with Amazon because its databases run only on AWS, its cloud computing service. On the other hand, Oracle gives customers options because its DBaaS runs on Premise, Amazon, IBM, Microsoft and other cloud computing services.

Oracle’s entry-level database, the “Exadata Express Cloud Service” costs $175.00 a month, which is cheaper than the similar offerings from Amazon.

Oracle Cloud Businesses Are Growing

Earlier this month, ORCL stock reported that its adjusted earnings increased four percent to $0.55 per share and total revenues rose two percent to $8.6 billion for its first quarter fiscal 2017. (Source: “Q1 FY17 GAAP SaaS, and PaaS Revenues were up 77% and up 79% in Constant Currency,” Oracle Corporation, September 15, 2016.)

Oracle’s cloud software as a service (SaaS) and platform as a service (PaaS) are growing rapidly; revenues from both businesses increased 77% to $798.0 million. Oracle stock’s revenues from its IaaS business climbed seven percent to $171.0 million.

During the quarter, ORCL stock added 776 new SaaS customers, 2,032 new PaaS customers, and 1,671 new IaaS customers.  Its active SaaS base is now 2,800 customers while its combined PaaS and IaaS installed base is now 18,892 customers.

The Bottom Line on ORCL Stock

Oracle demonstrated that its IaaS and DBaaS offerings have huge technological and cost advantages that could attract more clients in the cloud computing industry.

Oracle stock may not easily cannibalize Amazon’s market share, but it has much room to grow. The spending on public cloud IaaS for both hardware and software worldwide is estimated to reach $173.0 billion by 2016. (Source,  “Roundup of Cloud Computing Forecasts and Market Estimates,” Forbes, March 13, 2016.)

Holders of ORCL stock should remember that the company’s management is committed to returning value to them through technical innovation, strategic acquisitions, stock buyback, and dividend payments. Oracle stock repurchased 49 million shares worth $2.0 billion in the first quarter, and its board approved a quarterly dividend of $0.15 per share.  Oracle stock has been raising its quarterly dividend over the years.

Wall Street analysts believe that Oracle will continue to outperform the market and ORCL stock would continue to deliver handsome returns to investors. The stock gained more than 10% over the past year. Analysts  have forecasted that ORCL stock would trade as high as $52.00 per share, an upside of 31.8% over the next 12 months. Oracle stock closed $39.12 per share on September 29.