Nomura On Oracle: 'Hop On This Train'

After gaining nearly 30 percent over the past year, analysts at Nomura see even more upside for Oracle Corporation (NYSE: ORCL)'s stock. 

The Analyst

Nomura Instinet's Christopher Eberle initiated coverage of Oracle's stock with a Buy rating and $64 price target.

The Thesis

The case for buying Oracle's stock is based on the belief that companies will continue taking a hybrid approach to their cloud strategies and flocking toward Oracle's products and services, Eberle said in the initiation note.

The company's $33-billion on-premise business incumbency, combined with what is considered to be the "deepest" cloud-based application suite across ERP, HCM and CRM, positions Oracle "extremely well" to dominate the market, Eberle said. 

The analyst gave five reasons to justify a bullish stance: 

• The "depth and breadth" of Oracle's cloud-based application business suite product line is resulting in "meaningful" market share gains.
• The on-premise software has now reached an inflection point, as evidenced by growth in the new license software segment for the first time in 13 quarters.
• The cloud ERP total addressable market happens to be "significantly larger" than the on-premise ERP market, and Oracle has proven it can move down into the market and offer products and services at a much lower price point, according to Nomura. 
• Oracle's margin expansion will become "more meaningful" to the overall business model as cloud, SaaS, PaaS and IaaS grow to become a larger percentage of overall revenue.
• The economics surrounding total automation could prove to be "significant" for both Oracle and its customers and create a higher-value proposition, Eberle said. 

"In our view, the Street is overly concerned about cloud trends and competition from new database technologies and is not sufficiently focused on a more stable legacy core." 

Price Action

Shares of Oracle were up 0.78 percent Wednesday afternoon. 

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