The Lead: Oracle now owns minority equity in TikTok. Is Oracle Stock ($ORCL) a buy now that they have won the battle over Microsoft to purchase TikTok?

I’ll tell you what benefits Oracle gets out of winning the bidding war for tiktok and also analyze Oracle Stock to see if Oracle is a buy.

Oracle Stock Basics: 
Oracle is an enormous enterprise software leader. They are one of the biggest publicly traded companies in the world. Oracle provides products and services that address all aspects of corporate information technology management. Oracle is the most popular database management system provider and make the vast majority of their revenue through cloud services and licenses. 
 
However, despite Oracle being so big... they’ve grown stagnant. 

Oracle Stock who is looking for ways to grow revenue...buys TikTok:

Oracle is the final winner for TikTok in the bidding war for TikTok after the company entertained tons of offers from the likes of Microsoft, Walmart, Twitter and others. 

Let'ss look at how and why Oracle won. 

In the Microsoft Bid, a Microsoft press release stated that the company "would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation," directly addressing the geopolitical tension surrounding TikTok's wild popularity and operation in the U.S. In fact, these intended protocol changes may prove to be why Microsoft's takeover bid was summarily rejected. (Nasdaq.com)

In the Oracle deal, ByteDance retains operational and financial control of the US asset, while Oracle becomes a “Trusted technology partner” which is responsible for storing and securing data in the US. This does not mean that Oracle gets access to the TikTok algorithm or moderation of messages pushed by TikTok. 

So if we said that the algorithm and technology inside the TikTok app are the most valuable, and Oracle’s accepted deal does not grant them those things, why would Oracle want TikTok then?

I think there are three reasons Oracle did this. 
1) Oracle will likely be paid very well for their partnership in this deal either as a lump sum payment or a contract dealing in advertising opportunity potential.
2) TikTok has huge digital advertising potential. This could boost Oracle’s cloud business.
3) Global media attention attracting investors and future business deals that spawn out of this.
4) Oracle leadership has a close relationship with the Trump administration. These relationships could have factored into Oracle taking initiative to get the deal done and step up.

So is Oracle Stock a Buy?

The Oracle Quarter 1 Earnings Report:

On September 10, Oracle released its better than expected earnings report. 

Oracle has seen revenue stagnate over the past few years. Revenue declined 1% to 39.1B in fiscal 2020 (which ended May 31 for the company). However picking up at the most recent quarterly earnings report, Oracle beat expectations on both earnings per share and revenue.

Revenue Growth: +2% to 9.4B
Earnings: +16% to 72/share

Company infrastructure business is growing rapidly thanks mostly to Zoom. Oracle is the main partner for Zoom’s cloud infrastructure and revenue has doubled since the last quarter. 

Oracle trades at around 12 times one year forward earnings which is a bargain compared to other technology stocks. 
Is Oracle a buy?:

Oracle’s bid is to become a top player in the cloud infrastructure space... is still far behind given its late entry and they’re entering into a market dominated by Amazon and Microsoft. 

Oracle has strong assets and a long history of success. The key is that revenue is underperforming key cloud rivals which means that you have better growth stocks out there to choose from.

However, as Oracle scales their cloud services business, margins will grow, but this again is lagging and are growing slowly. Oracle is a tech company that definitely plays the role of a slow growth dividend stock. There is upside here and a safer play, but I think there are better options out there than Oracle even with the TikTok acquisition.   

🚩Disclaimer: I am not a financial advisor. These videos are entertainment purposes only. Any stocks discussed on the video are not to be considered “investment recommendations”.  Unless investments are FDIC insured, they may decline in value and/or disappear entirely. You (and only you) are responsible for the financial decisions that you make.

🔦Sources:
https://www.thestreet.com/investing/t...
https://www.fool.com/investing/2020/0...
https://www.ig.com/en-ch/news-and-tra...
https://www.nasdaq.com/articles/will-...