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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (10439)	4/9/1999 8:35:00 AM
From: Racso	Read Replies (1) \| Respond to of 19079

ORCL to disclose new e-commerce applications nytimes.com

To: Gary Korn who wrote (10439)	4/9/1999 12:57:00 PM
From: Maverick	Respond to of 19079

ML is bullish on ORCL 4/8/99, LT BUY Excerpts of ML's research: Estimates (May) 1998A 1999E 2000E EPS: $0.64 $0.86 $1.06 P/E: 33.5x 24.9x 20.2x EPS Change (YoY): 34.4% 23.3% Q4 EPS (May): $0.27 $0.35 Investment Highlights: · ORCL's recent weakness due to valuation erosion in enterprise software sector, not any ORCL-specific issues. Y2K concerns prevail and likely will through the summer. · Expect ORCL to rebound as negative group psychology stabilizes. · Investors should be patient as momentum market has pushed ORCL and sector to historically low valuations. · ORCL at 18.6x our CY 00 EPS for 25%+ EPS growth. Trading at 30% discount to market P/E for more than twice the earnings growth. Fundamental Highlights: · No fundamental change to our estimates or position on Oracle. · Expect 4Q 99 (May) results to be released late June. Revenues +18.5% to $2.86 billion. EPS $0.35 (+28%). · Recent data point: 50% of deals which slipped from 3Q 99 have been booked in March, a healthy recapture rate. · Next catalyst for stock: Analyst Day in San Francisco, May 13 th . Summary ORCL has not escaped the dramatic drop in enterprise software valuations in the last week, which has been precipitated by a wave of pre-announced disappointments this earnings season. Under-performance in a momentum-driven market and Year 2000 budget concerns are hanging heavily over the entire sector, pushing aside traditional valuation measures and driving most stocks in the sector below 52 week lows. Oracle's role as a key provider of e-commerce infrastructure (databases) and its solid financial foundation has been pushed to the background, giving Y2K center stage and pushing the stock to near-historically low valuations. Oracle's fundamental investment thesis is unchanged: · the company's database is the choice for electronic commerce platforms; · new product cycles (Oracle 8i database and Release 11 Web-based Applications) are rolling out at present; · the margin expansion potential of 100-200 basis points over next 12 months is intact; · while early in the quarter, 4Q 99 business appears to be tracking, with 50% of deals which slipped from 3Q 99 being booked in March (healthy recapture rate). These elements have been lost in the panic selling which is gripping this sector. ORCL has not been able to swim against this downtrend, but we remind investors that they are buying stock in a company which should generate revenue growth of 22% to $8.7 billion in FY 1999, with 21% operating margin, almost $2.5 billion in cash and ownership of over 60% of the corporate database market. With ORCL's earnings growth projected to be 2x the market earnings growth rate for a 30% discount to the market multiple, we believe that eventually the market will come around to Oracle. Until then, the riptide of momentum selling will weigh on the stock. As the selling abates (we believe we are near a trough), we particularly think investors with 12 month investment horizons should accumulate the stock. We believe risk/reward in ORCL is approaching very attractive levels.