Oracle Corporation

ORCL Details

Improved Operating Performance to Aid Business Growth: Oracle Corporation (NYSE: ORCL) offers a complete suite of integrated applications used for sales, service, marketing, human resources, finance, supply chain and manufacturing.
Q2FY20 Operational Highlights for the period ended 30 November 2019:ORCL came up with its quarterly results, wherein the company reported revenue amounting to $9,614, up 1% from FY18. The business reported 3% y-o-y growth in cloud services and license support segment revenue to $6,811 million. Operating income stood higher at $3,183 million, as compared to $3,101 million in Q2FY19, representing 33% of the total revenue. Net income stood at $2,311 million, down 1% on previous corresponding period on account of lower non-operating income. The business reported a capital expenditure of $1,591 million in Q2FY20.


Income Statement Highlights (Source: Company Reports)

Valuation Methodology: EV/Sales Based Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of ORCL closed at $44.72 with a market capitalization of ~$143.45 billion. The stock made a 52-week low and high of $44.26 and $60.50 and is currently trading at the lower band of the range. Oracle is the only one of the big four cloud companies that offers both Enterprise Application Suites and Secure Infrastructure technologies in a single unified cloud. Oracle’s unique spot in both applications and infrastructure overlays the way for enormous innovation, which is expected to deliver improved business performance. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using EV/Sales based relative valuation method. For the purpose, we have considered peers like Salesforce.Com Inc (NYSE: CRM), Microsoft Corp (NYSE: MSFT), Amazon.com Inc (NYSE: AMZN), etc., and arrived at a target price with a lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $44.72, down 7.95% as on 11^th March 2020.


ORCL Daily Technical Chart (Source: Thomson Reuters)

Microsoft Corporation

MSFT Details

Solid Growth Across All Segments: Microsoft Corporation (NYSE: MSFT) is an information technology company which offers a wide range of cloud-based services to individuals and businesses. The business is a provider of licensing services and engages in supporting an array of software products; designing, manufacturing, and selling devices; and delivering relevant online advertising to a global audience. 
Operating Highlights for Q2FY19:MSFT declared its quarterly results, wherein the business posted revenue of $36,906 million, up 14% on pcp terms, aided by 27% y-o-y growth from Office 365 Commercial and higher revenue per user. The business derived solid revenue growth of 24% from LinkedIn application while Dynamics revenue grew 12% on y-o-y basis. The business reported a 27% growth in its ‘Intelligent Cloud’ segment aided by 62% growth in Azure, well supported by 30% growth in the server products and cloud services. Windows revenue stood at $835 million, up 18% on y-o-y basis, while the business witnessed a 21% decline in gaming revenue to $905 million.


Q2FY20 Financial Highlights (Source: Company Reports)

Guidance: On account of the outbreak of COVID-19, the business expects that it would fail to meet its More Personal Computing revenue guidance of$10.75 and $11.15 billion due to the negative impact across the Windows OEM and Surface product-lines.

Valuation Methodology: Price to Earnings Based Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months 

Stock Recommendation: The stock of MSFT closed at $153.63 with a market capitalization of ~$1.17 trillion. The stock made a 52-week low and high of $110.98 and $190.70 and is currently trading above the average of the range. The business provides new aged technology products like intelligent cloud services, personal computing and other applications, which are widely used by the individuals and corporates. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using price to earnings based relative valuation method. For the purpose, we have considered peers like Salesforce.Com Inc (NYSE: CRM), Adobe Inc (NYSE: ADBE), Facebook Inc (NYSE: FB), etc., and arrived at a target price with a lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $153.63, down 4.53% as on 11^th March 2020.
 

MSFT Daily Technical Chart (Source: Thomson Reuters)
 

Facebook, Inc.

FB Details
Growth in Daily Active Users to Aid Business Growth: Facebook, Inc. (NYSE: FB) provides IT based social platform, where users can connect with each other through computer devices, mobile phone, tablets etc. On 9^th March 2020, the company informed about the appointment of Nancy Killefer and Tracey T. Travis as directors with immediate effect.

FY19 Operational Highlights for the Period ended 31 December 2019: FB declared its full year results, wherein the company reported its revenue of $69,655, depicting a growth of 27% on y-o-y basis. Daily active users (DAUs) for the month of December 2020 stood at 1.66 billion, depicting a growth of 9% on y-o-y basis. Monthly active users (MAUs) grew 8% on y-o-y basis to 2.50 billion as of December 2020.Income from operations stood at $23,986 million, down 4% on pcp basis on account of 51% rise in total costs and expenses to $46,711 million. For FY19, the company reported itscapital expenditures amounting to $15.65 billion.


Key FY19 Income Statement Highlights (Source: Company Reports)

Valuation Methodology: Price to Earnings Based Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months 
Stock Recommendation:The stock of FB closed at $170.24 with a market capitalization of ~$485.26 Billion. The stock made a 52-week low and high of $159.28 and $224.20 and is currently trading at the lower band of the range. With its widely accepted products like WhatsApp, Instagram, Messenger and Facebook, the business is likely to deliver improved business performance in coming years. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using price to earnings based relative valuation method. For the purpose, we have considered peers like Apple Inc (NYSE: AAPL), Twitter Inc (NYSE: TWTR), Alphabet Inc (NYSE: GOOGL), etc., and arrived at a target price with a lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $170.24, down 4.46% as on 11^th March 2020.


FB Daily Technical Chart (Source: Thomson Reuters)

Bank of America Corporation

BAC Details

Retains Decent Asset Quality: Bank of America Corporation (NYSE: BAC) offers a diversified portfolio of banking and other financial services across the USA.

Q4FY19 Operational Highlights:BAC announced its quarterly results, wherein the company reported total loans and leases of $974 billion, up 4% on y-o-y basis aided by 7% growth from the consumer banking and GWIM segment. CET1 ratio stood at 11.5%, as compared to 11.7% in Q3FY19. The business reported Supplementary leverage ratio (SLR) of 6.4%, that declined from 6.6% in Q3FY19. Net interest income came in at $12.3 Billion, with no change from previous quarter. The company reported lower non-interest expense of $13.2 Billion, as compared to $15.2 Billion in Q3FY18 driven by absence of impairment charge of $2.1B for notice of termination of the merchant services joint venture at the conclusion of its current term. As far as the asset quality is concerned, net charge-offs stood at 0.39%, up from 0.34% in previous quarter.


Asset Quality Highlights (Source: Company Reports)

Valuation Methodology: Price to Book Based Relative Valuation

Price to Book Based Relative Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months 

Stock Recommendation:The stock of BAC is closed at $22.67 with a market capitalization of ~$197.79. billion. The stock made a 52-week low and high of $21.51 and $35.72 and is currently trading at the lower band of the range. The bank has a healthy financial ratio along with decent Asset Quality and is expected to retain its leading position in coming years. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using price to book based relative valuation method. For the purpose, we have considered peers like HSBC Holdings PLC (NYSE: HSBA), U.S. Bancorp (NYSE: USP), Morgan Stanley (NYSE: MS), etc., and arrived at a target price with a lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $22.67, down 3.98% as on 11^th March 2020.

 
BAC Daily Technical Chart (Source: Thomson Reuters)

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