Stocks Poised to Outperform Oracle within the Following Two Years: Insightful Analysis and Top Picks
Loosened Leash on Tech Titans
Oracle's (ORCL 1.52%) Stock Knocking Socks off with a staggering 85% surge over the past two years, outshining the S&P 500's paltry 45% comparable gain. This rollercoaster ride has shot its market capitalization skyward to a whopping $420 billion. The catalyst behind this meteoric rise? The boom in its cloud and AI businesses.
Once upon a time, Oracle was pigeonholed as a slow-growing database software provider. But it shed this label over the past decade, transforming a great deal of its on-premise software into cloud-based services. The company also gobbled up a load of higher-growth companies, like NetSuite and Cerner, to cement its push into the cloud realm and bolster its infrastructure platform.
Analysts predict that from fiscal 2024 (which ended last May) to fiscal 2027, Oracle's revenue and EPS will grow at a compound annual growth rate (CAGR) of 13% and 19%, respectively. The AI market's relentless expansion should continue to pump up Oracle's database and cloud infrastructure services.
If the company hits these targets and still trades at 30 times forward earnings by the beginning of 2027, its stock price could swell 23% to $189 per share, pushing its market cap to a gut-busting $517 billion. Two lesser-valued tech stocks — Alibaba (BABA 0.01%) and Strategy (MSTR 5.40%) — could potentially overshadow Oracle's market cap within the next two years, thanks to even bigger gains.
Alibaba
Alibaba, China's colossal e-commerce and cloud infrastructure monster, has borne the brunt of several major setbacks over the past four years. In 2021, China's antitrust watchdogs fined the company and forbade its e-commerce business from locking in merchants with exclusive deals, employing aggressive loss-leading promotions, and making unapproved acquisitions. These punishments weakened its defense against smaller e-commerce competitors.
China's sluggish recovery from the pandemic, exacerbated by the government's unpredictable “zero COVID” lockdowns, further strained the company by stifling consumer spending and prompting businesses to tighten their cloud project purses.
The escalating tech war between the U.S. and China also chased away some of Alibaba's multinational customers. TikTok, the platform owned by ByteDance, migrated the data of its U.S. users from Alibaba Cloud to Oracle's cloud platform in 2022.
Despite these challenges, Alibaba, valued at around $330 billion as of writing, is still flexing its growth muscles. From fiscal 2024 (which ended last March) to fiscal 2027, analysts expect its revenue and EPS to grow at a CAGR of 7% and 30%, respectively. That's an impressive growth rate for a company that trades at 17 times forward earnings.
Alibaba is making up for the sluggish expansion of its Chinese marketplaces (Taobao and Tmall) by branching out into overseas and cross-border marketplaces and rolling out new large language models (LLMs) to capitalize on the rapid growth of the AI market. Assuming Alibaba aligns with these predictions and maintains the same forward valuations over the next two years, its stock price could more than double to $322 per ADR and push its market cap to an impressive $730 billion.
Strategy
Strategy, formerly known as MicroStrategy, has transmogrified from a slow-growing analytics software company into the world's most prolific holder of Bitcoin (BTC 3.39%) over the past five years. As of March 16, it was hoarding a mind-boggling 499,226 Bitcoins with an average purchase price of $66,360 per Bitcoin ($33.1 billion in total value). This incredible stake is now worth $41.7 billion and constitutes more than half of its market cap of $77.5 billion.
Strategy's core software business generates the majority of its revenue, but it's gradually expanding its cloud-based subscription services and introducing AI tools to compensate for the tepid demand for its on-premise software.
For the present, its software business's primary mission is to manufacture more cash for its Bitcoin purchases. It plans to rake in $42 billion through 2027 by following its “21/21 plan”, which involves issuing $21 billion in new equity and $21 billion in fixed-income securities. This bold strategy could dilute its investors and jack up its debt levels, but it reckons Bitcoin's ascending price will counteract that strain.
If Bitcoin soars over the next two years, Strategy's valuations will skyrocket. The Bitcoin crystal ball remains cloudy, with projections ranging wildly, but a new report from the Journal of Risk and Financial Management suggests its ever-diminishing scarcity could propel its price to a stunning $1 million by 2027. Strategy's chairman, Michael Saylor, is even more bullish, predicting its price will reach $13 million by 2045.
It's pure speculation where Bitcoin will finally land in 2027. But if its price explodes to new heights, Strategy's stock could generate mind-blowing multibagger gains, making it potentially more valuable than Oracle in a new Bitcoin market frenzy.
Enrichment Data:
Overview:
Here's a birds-eye view of the projected growth rates for Oracle, Alibaba, and Strategy (MicroStrategy) from fiscal 2024 to fiscal 2027, plus how their stock prices might respond if these projections hold true.
Oracle:
- Growth Rates: Analysts anticipate Oracle's revenue and earnings per share (EPS) to expand at a compound annual growth rate (CAGR) of 13% and 19%, respectively.
- Potential Stock Impact: If Oracle meets these estimations, its stock price could surge by around 23% by 2027, hitting approximately $189 per share, thereby boosting its market capitalization to around $517 billion.
Alibaba:
- Growth Rates: Analysts project Alibaba's revenue and EPS to grow at a CAGR of 7% and 30%.
- Potential Stock Impact: If Alibaba hits these targets and maintains the same forward valuations for the next two years, its stock price could almost quadruple to around $322 per ADR, potentially jacking up its market capitalization to a whopping $730 billion.
Strategy (MicroStrategy):
- Growth Highlights: Strategy's growth trajectory is difficult to pin down based on conventional revenue projections. Its value could drastically increase if there were to be a Bitcoin bull market, given that Strategy owns vast Bitcoin reserves. The company's stock value is heavily influenced by these digital holdings.
- Potential Stock Impact: In a scenario where Bitcoin soars to new highs, Strategy's stock could experience monumental gains, potentially exceeding Oracle's market capitalization if the Bitcoin bull market is robust.
Investing in Oracle's stock might result in substantial growth, as analyst predictions suggest a potential 23% increase in the stock price to $189 per share by 2027, leading to a market capitalization of $517 billion.
Alibaba's stock, currently valued at around $330 billion, could more than double to $322 per ADR by 2027 if it follows analysts' expectations for a 7% revenue growth rate and 30% EPS growth rate. This move would push its market capitalization to an impressive $730 billion.
Strategy's stock, heavily influenced by its Bitcoin holdings, could experience monumental gains in a Bitcoin bull market, potentially exceeding Oracle's market capitalization if the market for digital assets is robust.
Regulators play a crucial role in shaping the tech landscape, as seen in Alibaba's case when China's antitrust watchdogs issued fines and restrictions that affected the company's growth.
In the realm of finance, Oracle's cloud and AI businesses are key drivers behind its meteoric rise, with the AI market expansion continuously fueling Oracle's database and cloud infrastructure services.
Collaboration between companies, like Oracle acquiring NetSuite and Cerner to bolster its cloud infrastructure, has been a popular strategy to cement positions in the cloud realm.
