Shares of Oracle Corporation (ORCL) soared more than 10% after the company announced another blowout quarter. Revenue increased 2.8% to $10.9 billion, beating consensus estimates by $450 million, and earnings per share came in at $0.89, beating consensus estimates by 11 cents. The growth was driven by software-as-a-service cloud sales that jumped 75% to $1 billion, which also helped boost operating margins by 6% to 46%, leaving the firm with $21.8 billion in cash.
Looking ahead, CEO Mark Hurd indicated that Oracle expects to surpass $2 billion in new cloud annual recurring revenue next fiscal year. These results mirror the growth seen at other cloud-focused companies such as Amazon.com, Inc.'s (AMZN) AWS and Microsoft Corporation's (MSFT) Azure. Oracle's cloud plus on-premise software revenue also grew about 6% to $8.9 billion, suggesting that the cloud isn't fully cannibalizing the company's on-premise solutions business. (For more, see: Oracle Beats on Q4 Earnings and Revenues, Stock Up.)
Several analysts raised their price targets on Oracle stock following the favorable news. Stifel raised its price target from $47 to $52; BTIF upped its price target from $47 to $58; and JPMorgan increased its price target to $55.
On a technical level, the stock broke out from its upper trendline resistance and R2 resistance at $47.10 to multi-year highs. The relative strength index (RSI) appears overbought at 85.76, which suggests that the stock could see some consolidation before any move higher. However, the moving average convergence divergence (MACD) experienced a sharp bullish crossover, suggesting that the stock's bullish trend should continue.
Traders should watch for a period of consolidation at around $50.00 before any significant move higher but maintain a bullish bias on the stock over the short and long term. With the company's cloud businesses experiencing ongoing growth, the stock should continue to benefit from the favorable tailwinds affecting the industry. (See also: Amazon, Microsoft Still Rule Cloud; Oracle, Alibaba May Catch Up.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.