Investors in Oracle Corporation (NYSE:ORCL) — at least, those who came on board after 2002 — have been a pretty happy lot. When the dotcom bubble burst in 2000, ORCL stock was hammered. In just two years, investors saw their holdings drop in value by more than 80%. However, since 2002, Oracle shares have been in growth mode.

By 2015, the stock had recovered to 2000 levels. From 2015 through 2020, the pace slowed. Then it kicked into high gear late last fall. Since November 2020, ORCL stock has posted a 55% gain. That’s despite a tech stock selloff in May.

A big part of Oracle’s growth story has been the company’s move into cloud computing. It’s a huge market that was worth $321 billion in 2019 and is projected to top $1 trillion by 2026. Oracle is now getting the majority of its revenue from its cloud-based applications.

One of the keys to its continued growth is a push into cloud infrastructure with Oracle Cloud. The company’s success in that venture is going to play a big part in keeping its upward trajectory going.

Oracle Has Mastered the Cloud Transition

On June 15, Oracle reported its fiscal fourth-quarter and full-year 2021 results. For the year, revenue was up 4% year-over-year (YOY). In Q4, with employees returning to their offices, Oracle’s revenue was up 8% YOY.

That’s a solid showing given that Oracle is primarily an enterprise software and solutions company. Over the past year, enterprise IT spending took a hit due to the pandemic.

The numbers also showed how successful Oracle has been in transitioning its products to the cloud. For the fourth quarter, $7.4 billion of its $11.2 billion in total revenue was attributed to cloud services and license support. An additional $2.1 billion came from a mix of Cloud and on-premise license revenue.  

The big question in its strategy is Oracle Cloud. This isn’t about the company moving its applications to the cloud. This is an attempt to provide cloud infrastructure for other companies and muscle into the territory of other services. Oracle has a very small slice of this market, although it has scored some notable clients over the past several years.

In March, the company said Oracle Cloud brings in annualized revenue of more than $2 billion. The service is a big growth opportunity, but because it is in the spotlight, it can also have a cooling effect on ORCL stock. For example, an April dip was the result of missing out on an Israeli government cloud computing contract.

And despite beating both earnings and revenue expectations in June, ORCL stock dropped after the company revealed it is planning on $4 billion in capital expenditures this year to expand Oracle Cloud infrastructure. 

The Bottom Line on ORCL Stock

Oracle has proven that it can successfully transition its enterprise applications and database products to the cloud. The big question when looking at ORCL stock’s current trajectory is whether Oracle Cloud will gain traction. And if it does catch on, can it do so fast enough to outweigh the company’s infrastructure spending to support it?

This Portfolio Grader “B” rated stock may see its growth return to more modest levels if it can’t continue to sign up big customers.

The investment analysts polled by Wall Street Journal clearly have doubts. The 28 analysts give ORCL stock a consensus “hold” rating by a wide margin. Their average price target of $82.09 has 6% downside. 

The past two decades have shown you can count on ORCL stock to appreciate in value. As a long-term play, it’s a relatively safe bet. Oracle also has a solid track record of paying quarterly dividends; its latest was 32 cents. This also makes it a candidate if you want to add an income stock to your portfolio.

I would be hesitant to buy shares now with the expectation of 2021-level gains continuing. However, as a stock with proven long-term growth and dividend payments, it’s a worthy portfolio addition. If you’re in the same camp as the analysts, you might want to hold off for a bit in case shares see a minor correction in the next 12 months. 

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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