Oracle Trading at “Undeserved Discount”

Cowen software analyst Peter Goldmacher this morning repeated his Outperform rating on Oracle (ORCL) and added the company to the “Cowen Focus List.”

Goldmacher also increased his 2008 EPS estimate for the company to $1.13 a share from $1.11. (He continues to see profits this year of 98 cents a share, up from 80 cents in 2006.) Goldmacher writes:

We believe investors are being given an opportunity to build long term positions in one of the premier software names at an attractive valuation, as shorter term investors are putting pressure on the stock ahead of 3Q results. We believe the Street is discounting three significant top and bottom line growth drivers; data creation & utilization, IT spending consolidation, and M&A inspired margin expansion.

He contends that Oracle trades at “an undeserved discount to its large cap software peer group relative to its ability to drive revenue growth and margin expansion.”

In pre-market trading, Oracle shares today are up 10 cents at $16.92.

ORCL 1-yr chart

Comments

[Malkiel:]

"He contends that Oracle trades at 'an undeserved discount to its large cap software peer group relative to its ability to drive revenue growth and margin expansion'".

Perhaps the problem is that the group itself is rather tricky. Companies within it tend not to be able to keep on "driving revenue growth and margin expansion" in a vacuum--their activities depend upon hardware, telecom, media, etc. trends well outside their control. If the group is down, don't expect its leading citizens to be up...

2007 Feb 26 05:04 PM