The Cloud Obscures Oracle's Future
The cloud transition brings too much uncertainty.
Oracle (ORCL) is a best-of-breed provider of on-premises relational database technologies and enterprise resource planning software. It is one of the most profitable companies in the software industry. However, growth has been lacking as more customers shift their workloads to the cloud, bypassing Oracle’s solutions. Despite Oracle’s cloud migration efforts, cloud competition is likely to provide headwinds. As a result, we have downgraded our economic moat rating to narrow from wide while maintaining our negative moat trend rating. However, we raised our fair value estimate to $53 per share from $50 as we see more organic growth potential for Oracle. This increase doesn’t factor in a partnership with TikTok, as that deal remains unfinalized.
Oracle’s business centers on its relational database, which stores a treasure trove of data that is the lifeblood of many enterprises. Oracle’s software offerings leverage this database as its back end, while Oracle’s servicing and hardware businesses support these database tasks. Oracle remains a best-of-breed provider of on-premises databases and software, and customers face very high switching costs if they look to migrate elsewhere. However, we don’t view the company as being at the forefront of recent software trends, and new and potential customers appear to be looking past Oracle for their database needs.
Julie Bhusal Sharma does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.