Oracle will succeed in transitioning its software businesses to the cloud, according to one Wall Street firm. Credit Suisse on Tuesday initiated coverage of the company with an outperform rating.
“We believe the market underappreciates the staying power of Oracle’s technology stack and upside opportunities in the cloud,” analyst Brad Zelnick wrote in a note to clients. “While traditional financial metrics have lagged given a cloud transition, the stock is valued as if there’s no tomorrow, or no other side to the transition.”
Oracle had a market value of $209.4 billion as of Friday, according to FactSet.
The software company has outperformed the market this year with its shares up 31.7 percent year to date through Friday, compared with the S&P 500’s 10.6 percent return.
Zelnick initiated his price target on Oracle at $62, representing 22.5 percent upside from Friday’s close.
He cited how the enterprise resource planning software market size was $43 billion in 2016 and Oracle has the best cloud ERP product.
“The cloud ERP opportunity is just now heating up, and ORCL is in pole position,” the analyst wrote. “Our field work suggests ORCL has the leading cloud product in the largest of app software categories (ERP) … and an advantage given its incumbency.”
Zelnick also noted how Oracle has successfully acquired more than 60 companies since 2004.
“ORCL is our favorite aggregation play. We particularly like companies that can parlay dominant market positions into adjacencies to capture incremental wallet share,” he wrote. “This has been a consistent strategy for ORCL over the years … and cloud is just the latest chapter.”
Oracle shares were up slightly after Tuesday’s market open following the report.