Here’s What Polen Capital Say About Oracle Corp. (ORCL)’s Move to Cloud

Polen Capital discussed Oracle Corporation (NYSE: ORCL) and other companies in its Q2 investor letter – you can download a copy here. The investment management firm believes that the “cloud is more incremental” to Oracle’s business “than threatening.” Let’s take a look at Polen Capital’s comments about Oracle.

Oracle’s weakness in the quarter likely has more to do with its new earnings disclosures or lack thereof. The business is growing as we would expect with Oracle navigating a complicated transition to the cloud that is not very easy to track as outsiders. We have been very patient shareholders for 13 years as we know how difficult it is to replace Oracle’s databases once they are operating inside a customer’s business.

It is not the fastest growing business, but it does have a lot of stability and satisfactory growth potential as cloud is more incremental to their business than threatening. Going forward, Oracle is merging its on-premise and cloud disclosures, making it even more difficult to track the progress here over time. We, likely along with many other shareholders, will be communicating our dissatisfaction with their disclosure policies and hope management reconsiders. The stability of the underlying business makes this more of a nuisance issue for us, but we certainly believe more disclosure is better than less, especially during business model transition periods like they are going through today.

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For the first quarter of fiscal 2019, Oracle Corporation (NYSE: ORCL) reported total revenues of $9.2 billion, up 1% in U.S. dollars and up 2% in constant currency, compared to the same quarter last year. Total cloud services and license support plus cloud license and on-premise license revenues were up 2% to $7.5 billion. Cloud services and license support revenues were $6.6 billion, while cloud license and on-premise license revenues were $867 million.

Oracle shares are up 8.22% since the beginning of this year. The company’s share price has increased 17.77% over the past three months and 7.38% over the past 12 months. ORCL has a consensus average target price of $53.14 and a consensus average recommendation of ‘OVERWEIGHT’, according to analysts polled by FactSet. The stock was closed at $51.63 on Wednesday.

Further, Oracle Corporation (NYSE: ORCL) is a popular stock among many hedge funds tracked by Insider Monkey. As of the end of the second quarter of 2018, there were 50 funds in our database with position in the company, including Yacktman Asset Management, International Value Advisers, and BloombergSen.

Disclosure: none