24/7 Wall St. 2007 Price Targets: Oracle, $16

Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high

Oracle (ORCL). The market fell in love with Oracle again in 2006. After trading below $14 most of the previous year, the big enterprise software company’s shares jumped to close to $20. The huge sums that the company paid for PeopleSoft and Seibel seemed to be forgotten as Oracle turned in strong numbers, especially in the second calender quarter of 2006. In the quarter after that, reported in mid-December, Oracle’s revenue rose 26% to $4.16 billion, but the company’s critical licensing business grew slower that Wall St. wanted and the stock dropped 5% in a day.

Wall St. is now concerned that Oracle may grow through expensive acquistions, but growth from within, of "organic" growth may be much less robust than the markets had hoped. And, competitors are trying to make sure that Oracle’s organic growth is as slow as possible. Microsoft has introduced its own database products and is gaining share compared to Oracle. Oracle also makes a great deal of money selling support for its own products. But, some companies have come into the market and will offer support for lower prices.

The markets have also been tempted to rule-out a comback by Oracle’s largest rival, SAP. And, that may be a mistake. SAP said recently that it expects double-digit growth over the next year, lead by progress in the US markets. And, there is only some much double-digit growth to go around.

Factors that could move price above forecast: With doubts about Oracle’s organic growth, a quarter in which the company showed progress in revenue from beyond its acquisitions would do a lot to move aside Wall St. fears.

Factors that could move the price below forecast: Oracle’s competitors are getting bigger and stonger. IBM needs growth in the enterprise software area to keep its turnaround on track. SAP claims that it will grow as fast as Oracle will. Microsoft has a group of software aimed straight at Oracle’s revenue sweet spot.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.