Eddy Elfenbein at Crossing Wall Street makes a persuasive case in favour of Oracle Corp. The technology behemoth, with a market capitalization of about $160-billion (U.S.), has certainly fared better than the S&P 500 over the past five years, not to mention some of its flat-lining blue-chip peers in the technology sector.
Oracle has gained 145 per cent, to the end of May, versus just 18 per cent for the index, 22 per cent for Microsoft Corp. and a decline of 14 per cent for Cisco Systems Inc.
Despite these gains, as Mr. Elfenbein points out, its price-to-earnings ratio is about even with the S&P 500's (below 15), even though its earnings have fared better than the overall market. Indeed, the worst recession of the past 70 years barely dented Oracle's earnings, which have since marched to record highs .
The company is expected to report is fiscal fourth-quarter earnings on June 23, and investors can probably expect to see some pretty good results, given Oracle's track record for under-promising and over-delivering.
"Oracle likes to the play the 'set-the-bar-low-and-guide-higher' game, and they play it very well," Mr. Elfenbein said on his blog.
"I understand the need for conservative estimates and that's most likely the sounder strategy, but I wanted to show you precisely what that means. If Oracle's stock keeps tracking its earnings, then I think it's very likely that the stock will hit $36 before the end of the year. That's about a 13 per cent jump from [Tuesday's]close."