Oracle

Oracle Corporation (NYSE:ORCL)’s fiscal third quarter earnings missed Wall Street expectations earlier this month. But the IT big boy still has new worlds to conquer. Cantor Fitzgerald analyst Brian J. White has initiated coverage of the stock with a Buy rating and $50 price target. Notably, last month Stern Agee analyst Robert Breza initiated coverage of the stock with Neutral rating and $40 price target.

Oracle

Oracle trades at 20% P/E discount to the S&P 500

Brian White says that despite its excellent profit metrics and profit growth potential, the stock is trading at 20% P/E discount to the S&P 500 index. Unlike most of its rivals, Oracle Corporation (NYSE:ORCL) thinks that engineering hardware and software working together delivers the best IT performance to customers. At the same time, it reduces operating costs and the total cost of ownership. Cantor Fitzgerald says the Larry Ellison-led company’s Engineered Systems could be a game changer in the IT industry. Oracle’s Engineered Systems business jumped by more than 30% during the third quarter while most of its competitors witnessed a decline.

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oracle-operating margin

Oracle Corporation (NYSE:ORCL) is a dominant player in the RDBMS market with 45% market share in 2012, according to research firm IDC. White estimates it to generate about 33% of the company’s total revenue. He says the new Database 12c has the potential to accelerate Oracle’s sales cycle over the next 1-2 year. The Redwood City, California-based company made Database 12c available to customers in July 2013. It was the first major upgrade since 11g R2 in 2009. Oracle says 12c is the first database designed for the cloud. It brings more than 500 new features, including an In-Memory Option and a multi-tenant architecture. The In-Memory Option can run queries about 100x faster for real-time analytics.

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Oracle is expanding its cloud business

Oracle Corporation (NYSE:ORCL) is aggressively expanding its cloud business with Oracle Cloud. Brian J. White says the company’s cloud initiatives are ready to soar. Oracle has been re-engineering its applications for the cloud for the past eight years. Cloud bookings (primary SaaS) surged 60% YoY during the third quarter. Cloud consolidation process is still in early stages. With its integrated cloud suite, Oracle is expected to become one of the major consolidators.

Cantor Fitzgerald’s $50 price target is based on 15x CY2015 EPS estimate.