Should you buy Oracle stock despite soft guidance?

Oracle Corporation (NYSE: ORCL) is trading up in extended trading after reporting better-than-expected results for its second financial quarter.

Oracle’s guidance for the third quarter

Shares are holding up even though the multinational’s guidance for profit came in a bit shy of Street estimates.

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For the current quarter, it expects $1.17 to $1.21 of adjusted EPS versus the analysts at $1.23 a share. Still, Daniel Morgan of Synovus Trust says Oracle Corporation is a good pick for consistency in the face of a rather challenging macroeconomic backdrop.

I’d expect Oracle into 2023 to be positioned very well. It trades at 15 times earnings, so its multiple is very low. They have a huge installation base, so a lot of their revenue is recurring, so they generate a lot of cash flow.

For the year, Oracle stock is down more than 5.0% at writing.

Oracle’s cloud revenue is growing fast

Earlier this year, Oracle spent roughly $28 billion to buy Cerner Corporation – a health technology company. According to Morgan, that acquisition will be significantly accretive to revenue as well.

Cloud revenue, as per the earnings report, was up a whopping 43% this quarter and he expects that growth to continue moving forward. Speaking with folks at Yahoo Finance, Morgan said:

Transition for Oracle as major player in cloud space is still intact. It has over 400,000 customers and only 35% have moved over to using their cloud service products. So, there’s a tremendous opportunity to convert their existing base.

Wall Street also has a consensus “overweight” rating on the Oracle stock.

Oracle stock up on strong Q2 results

• Earned $1.74 billion versus the year-ago $1.24 billion
• Per-share earnings also climbed from 46 cents to 63 cents
• Adjusted EPS came in at $1.21 as per the press release
• Revenue went up 18% year-over-year to $12.28 billion
• Consensus was $1.17 of adjusted EPS on $11.96 billion sales

Oracle also said that it would have earned another 9 cents a share this quarter without the currency headwinds. In related stock market news, Pentagon awarded its $9.0 billion cloud contract to four companies last week – Oracle was one of them.