In a difficult market, I suggest you add some high quality stocks on sale to your portfolio. Specifically, I recommend you consider Oracle (ORCL) stock, the world’s largest database management company with more than 430,000 customers in an incredible 170-plus countries. For close to half a century, the company has offered its software and, more recently, cloud-engineered systems.
While most investors still view Oracle primarily as a software company, the company wants to be seen primarily as a cloud company. Oracle is building on its already sterling reputation and extensive client base to expand into the highly sought-after cloud business.
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In addition, Oracle has the world’s first and only autonomous database. It has the industry’s broadest and deepest suite of cloud applications. More than 18,000 patents worldwide protect Oracle’s business model and profit margins. Most importantly, Oracle is now using all this to actively take on the “big three” in cloud services. These big three are Amazon Web Services, Microsoft Azure and Google Cloud Platform. Google now claims 6% of the cloud market, up 1 percentage point from a year earlier, though still far behind Amazon’s 41% share and Microsoft’s 20%.
These mega players currently dominate the U.S. public cloud market, which is growing so fast because instead of corporations running up bills building and maintaining their own data centers and servers, they can purchase what they need from cloud players – and then scale up or down as they wish.
The Real Reason to Like Oracle Stock
Many major companies have moved some of their computing to cloud services and this trend is picking up speed. Oracle has reinvented itself for this new trend, offering a cloud-only version of its core database software business while offering both speed and security.
Oracle has been helping hundreds of thousands of corporate customers by moving some of them to the cloud. In addition, like the big three, Oracle has been on the prowl for new companies, spending more than $80 billion on 150 acquisitions. This is still doable since it still has an ample cash position.
Google and its rivals are leveraging a new weapon in the battle for cloud-computing market share: significant investments in companies that agree to sign on to their services.
Google is especially well positioned to play this game. Thomas Kurian, serving as cloud chief executive since 2019 after a long tenure at Oracle, has been using the company’s $142 billion of cash to make it more attractive to customers. Microsoft has also taken stakes in several startups as part of deals that entail them using its cloud.
Oracle last year tried to buy a major stake in TikTok as part of a deal to have the China-owned social media app use its cloud service. Oracle also announced in late 2021 its biggest deal ever, the $28.3 billion acquisition of the medical-records company Cerner Corporation. This partnership will address a major challenge in healthcare, that of datasets that now can’t communicate with one another.
In the U.S., medical records and information are hosted on a range of platforms, which can make it difficult for one provider to collaborate with others, or for patients to get easy access to their data.
Oracle has used some of its excess cash to buy back its own shares, reducing its share count by 40%.
ORCL offers us growth, a huge cash position, and 38% operating margins, all at a very reasonable price – just 15 times forward earnings. In this turbulent market, it makes sense to add Oracle stock as a growing company trading at a very reasonable price.
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