Eye on Oracle

Mar 29 2012   8:53PM GMT

Is Wall Street’s grudge against Oracle warranted?

Lena Weiner Lena Weiner Profile: Lena Weiner

Despite less than stellar performance in a few areas, Oracle’s performance as discussed on their March 20th earnings call was generally held to be a solid quarter. Indeed, Oracle has all the elements of a successful stock option – a diversified portfolio, continued growth, and higher than expected earnings.

So, why isn’t its stock price increasing?

For the last five years, Oracle has outpaced the Dow by quite a bit. They have had amazing growth and exceeded market expectations. Then, last quarter, they hit a few widely publicized road blocks. While Oracle has never been a company that generated a lot of love, loyalty or fans, suddenly, everyone predicted the beginning of the end for Oracle.

With the results of last quarter in, it looks like those predictions may have been a bit premature.

So – why is Wall Street so quick to call Oracle out on one bad quarter?

Well, there are a lot of reasons. The often bombastic attitude of Oracle’s leadership doesn’t help Oracle’s case – there are many on Wall Street and in other industries who would love to see Oracle fail based on the prickly personalities at its helm alone, and drama just doesn’t do much for investor confidence.

A few analysts have begun to notice that Oracle’s stock seems to be undervalued. Oracle’s cash flow is strong; they do not specialize in any technologies on the verge of going obsolete; there are no current financial scandals to speak of; they have a solid, 4-star Morningstar rating and A1 rating from Moody’s; and, above all, Oracle’s growth has been remarkable- all the earmarks of a company whose stock should be shooting through the roof.

Should Oracle continue to have successful quarters, Wall Street will likely come around. But, given Oracle’s reputation for being bombastic, unpredictable and arrogant, it probably will never become an investor favorite like Apple or Google.

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