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Oracle Stock Price Rallied 20% YTD, It’s a Defensible Pick

Oracle (NYSE: ORCL) stock price soared substantially since the beginning of this year, driven by traders’ confidence in its growth strategies. The company’s strategy of aggressively moving towards cloud markets is adding to investor’s sentiments.

Oracle stock price is currently trading around 52-weeks high of $60. Analysts believe its shares have further upside potential in the days to come.

ORCL Oracle Corporation daily Stock Chart

Cloud Penetration Adds to Oracle Stock Price

The company is seeking to expand its market share in cloud markets. This is apparent from its announcement of hiring close to 2000 workers for the cloud segment. The company plans to expand cloud computing services locations all over the world.

Oracle is likely to open 20 more data centers by the end of next year. This strategy would help the company to comply with local data storage laws and safely stash data for disaster recovery.

Its cloud services and license revenue of $6.81 billion in the first quarter topped the consensus estimate of $6.77 billion. Oracle is growing high margin cloud business while reducing the focus on hardware businesses. Its hardware revenue declined 10% year over year in the first quarter.

The CEO said, “As our low margin hardware businesses continue to get smaller, while our higher-margin cloud business continues to get bigger, we expect Oracle’s operating margins, earnings per share and free cash flow all to grow.”

Its first-quarter Non-GAAP earnings per share grew 14% year over year. This represents the third consecutive year of double-digit earnings growth

Cash Returns Are Safe

The company has been offering significant cash returns to investors in the form of dividends and share buybacks. The company has recently announced a share buyback program of $15 billion.

Its focus on share buybacks has also been enhancing its dividends and earnings per share. The company currently offers a quarterly dividend of $0.24 per share, yielding around 2%. Overall, Oracle stock price is likely to receive support from business strategies and cash returns.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.