Why Credit Suisse Believes Oracle Is Underappreciated
Oracle’s ability to aggregate adjoining markets makes it a favorite with Credit Suisse
Earlier in this series, we discussed expected growth in the cloud as well as Oracle’s (ORCL) position in the crowded cloud space.
In this article, we’ll look into the factors that made Oracle as a top enterprise software pick for Credit Suisse. According to Brad Zelnick, software industry analyst at Credit Suisse, it is not the cloud that is of prime importance in the software market, but the ability to “aggregate” adjoining markets within the entire software space—something that he believes Oracle does well.
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Citing Zelnick’s explanation about aggregation, Barron’s wrote: “Simply stated, aggregation occurs when a market participant can parlay its strength in a given market into capturing adjacent market opportunities; disaggregation represents the inverse phenomenon.”
Zelnick added, “The market underappreciates the staying power of Oracle’s technology stack and upside opportunities in cloud.” Stating his bullishness on Oracle stock, he said that Oracle stock is valued “as if there’s no tomorrow” and that he is optimistic about the value being created by the company’s development.
Oracle’s lead in the ERP (enterprise resource planning) space, which was a $52 billion market in 2016, adds to the company’s positives.
The chart above shows that cloud infrastructure spending, which reached $38.1 billion last year, is poised to grow to $55.8 billion in 2017.
Selected software companies worth holding in cloud
Like IBM (IBM), which has found a staunch supporter in Morgan Stanley (MS), it seems that Oracle has found similar support in Credit Suisse. Credit Suisse, which recently initiated coverage on Oracle stock with an “outperform” rating, gave the stock a price target of $62.
Apart from Oracle, VMware (VMW), ServiceNow (NOW), and Symantec (SYMC) are among the software companies that received an “outperform” rating from Credit Suisse. Both VMware and Symantec, which recently announced their fiscal earnings, exceeded analysts’ expectations on revenues and earnings per share.