Other segments, particularly the server and gaming divisions, along with other internet businesses like its Bing search engine, are also expected to contribute to revenue growth over the upcoming years. Mergers and acquisitions are not to be overlooked either; having played an important role in the past times (as evidenced by the Skype purchase), they will sure be important for the firm’s future.
Trading at 17.8 times its earnings, a 7% discount to the industry average, while offering substantial dividend yields, a moated business model and plenty of growth catalysts, I’d recommend buying this stock before valuation becomes less attractive.
Check with the Oracle: forecasts are good
Oracle Corporation (NASDAQ:ORCL) is a leading provider of enterprise software, hardware products, and services. Due to report earnings on Thursday, July 20, its stock price might go up. However, currently trading at 15.7 times its earnings, an 18% discount to the industry average, an attractive entry point is open for investors. With healthy margins and an above average growth history, I´d recommend buying and holding on to this stock while it is still valued cheaply.
The firm’s database and middleware business, which represent about 75% of new software license revenues, provide it with high client stickiness; steep switching costs and risks make companies continue buying Oracle Corporation (NASDAQ:ORCL)’s products and services. Moreover, its dominance in this sector also makes it the most popular platform amongst Software-as-a-Service developers, increasing incentives for clients to choose the company’s products, creating a virtuous circle (Morningstar).
Unlike many of its main competitors, Oracle Corporation (NASDAQ:ORCL) has been making an incursion in the cloud computing industry too, looking to create further motivations for clients to stick with Oracle Corporation (NASDAQ:ORCL), while slowly migrating to cloud-based platforms (without incurring in much trouble). Like the SaaS segment, Cloud-based services profits are expected to increasingly contribute to revenue in the upcoming years. Other innovative products, including the business intelligence and big data analytics segments, should also help drive Oracle Corporation (NASDAQ:ORCL)’s market share.
Acquisitions have and will continue to play an important role as well, as proven in the past by the purchase of some important companies like PeopleSoft Inc. and Sun Microsystems. A strong cash position will not only serve the purpose of expanding through acquisitions, but also returning value to investors through share repurchases and dividend payouts.
I have briefly analyzed the future prospects of three tech behemoths and arrived to the conclusion that, at current valuations, they are good picks for your investment portfolio. Buy while they are cheap and prepare to enjoy the upside for years.
The article 3 Long Ideas In The Technology Industry originally appeared on Fool.com and is written by Victor Selva.
Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.