Oracle Corporation (NYSE:ORCL) shares have fallen over the past three quarters after disappointing sales but Morgan Stanley believes this creates a unique buying opportunity.
Morgan Stanley raised its target price to US$57 per share from US$50 on Wednesday, sending Oracle shares higher.
Analyst Keith Weiss said investors have let go of the idea that Oracle’s cloud computing business could become the “next Microsoft” but they could be ignoring some potential upside.
In December, the company reported second quarter cloud revenue that missed analysts’ estimates and warned that growth would slow in the third quarter.
READ:Oracle shares drop after quarterly cloud sales miss expectations
But Weiss said some of Oracle’s other businesses remain strong, including databases, licensing and on-premise data storage.
He added that the company’s effective tax rate will fall from 17% to 15% under President Donald Trump’s tax reforms.
The repatriation of foreign cash will leave the company with an after-tax balance of US$46bn in undistributed earnings that can be used for share repurchases, dividends or mergers and acquisitions, Weiss said.
"We see the combination of continued stable fundamental performance, a lower tax rate and an increasing volume of share repurchases pushing to total return for ORCL into the low-teens over the next two years," Weiss wrote.
READ: Oracle shares drop as reports emerge that Amazon and Salesforce may be dropping its technology
The note comes a day after news that Amazon (NASDAQ:AMZN) and Salesforce.com Inc (NYSE:CRM) may drop Oracle's technology.