Microsoft
This is a conservative way for investors to participate in the massive cloud growth, and the company posted stellar second-quarter results. Microsoft Inc. (NASDAQ: MSFT) manufactures, licenses and supports a wide range of software products. The company has transformed its business model from a component-driven model (personal computer, server) to one driven by the need for cloud capacity.
Many Wall Street analysts agree that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offerings, and which continues growing at triple-digit levels. Some have flagged Azure as the biggest rival to Amazon’s AWS service.
Some analysts maintain that Microsoft is discounting Azure for large enterprises, so that Azure may be cheaper than AWS for larger users. The cloud was big in recent earnings reports and will remain a growing part of the software giant’s earnings profile.
Investors receive a 1.20% dividend. The Jefferies team has a conservative $275 price target, compared with the $329.56 consensus target. Microsoft stock closed on Thursday at $234.24.
Oracle
This top software stock has backed up recently and is offering an attractive entry point. Oracle Corp. (NYSE: ORCL) develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems and related services worldwide.
The company licenses its Oracle Database software to customers, which is designed to enable reliable and secure storage, retrieval and manipulation of various forms of data. Its Oracle Fusion Middleware software aims to build, deploy, secure, access and integrate business applications, as well as automate their business processes.
Oracle recently announced that it would acquire Cerner, a leading provider of digital information systems used within hospitals and health systems to enable medical professionals to deliver better healthcare to individual patients and communities. The all-cash tender offer has approximately $28.3 billion in equity value.
The company pays a 2.05% dividend. The J.P. Morgan price objective is $84, though Oracle stock has a consensus target of $87.89. On Thursday, the closing share price was $65.20.
We avoided semiconductor stocks for the time being, as the new government restrictions on sales to Chinese companies could be putting a big dent in sales. While we are not ready to nibble in that space, we will be closely watching third-quarter results of the top names. The software, networking and information technology leaders we did focus on could be the first to take off when the selling reverses.
Originally posted at 24/7 Wall St.
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