Shares of Oracle Corporation (ORCL - Get Report) are underway on Wednesday, rising almost 3% after analysts at Morgan Stanley updated the overweight stock of the same peso.
In fact, they did not give a reason to own the action, they gave five reasons. Speaking on CNBC's "Mad Dash" segment, Jim Cramer of TheStreet decided to take a closer look at the note.
While increasing its target price from $ 50 to $ 57, analyst Keith Weiss made several arguments in favor of Oracle, which include:
- A "full development" database business
- Restore the expectations of software applications as a service
- A lower tax rate
- Repatriation of cash abroad
- Low valuation vs. its historical average
According to comments by CEO Mark Hurd, Wall Street seems to have reacted in an exaggerated fashion to Oracle's previous earnings report, Cramer said. It was not as bad as the investors did, he added.
Perhaps Oracle's cloud business is improving. But even if that is not the case, the shares are very cheap, trading at only 15 times the future earnings. Oracle shares traded at the low $ 50 during the summer. Now, even with the new tax bill and the ability to repatriate cash abroad, Oracle's shares are traded at half or more than $ 40, he noted.
Will the company bring cash for the repurchase of shares? Oracle could very well, reasoned Cramer, who also manages the portfolio of Action Alerts PLUS charitable trusts.
The databases are in full swing and are good news for Oracle. But what else is in full swing? Mainframes, which is good news for International Business Machines (IBM - Get Report). While analysts at Morgan Stanley were hailed by Oracle, analysts at RBC Capital were optimistic about IBM. Analysts pushed IBM to beat the sector's performance and raised its target price to $ 180 from $ 160. The valuation was also a catalyst for analysts.
- Warren Buffett must be ignored when it comes to IBM shares
- Intel faces new threats from IBM and Qualcomm, even if it defends itself from AMD
- Oracle reverts to mergers and acquisitions to boost brand growth
"I'm in love with the mainframe cycle because the margins are big," Cramer said, adding that he is surprised that investors are not more optimistic about the catalyst. However, Warren Buffett, a big IBM investor, had been selling during 2017 and that seemed to triumph over everything else. In contrast, Buffett was a big Apple buyer (AAPL - Get Report).
If IBM can deliver good results, the action could be a spiral spring, Cramer concluded.
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