Why Oracle Corporation Might Pop in 2014

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Oracle Corporation (NYSE: ORCL  ) gained slightly this morning after Deutsche Bank upgraded the enterprise software gorilla from hold to buy.

So what: Along with the upgrade, analyst Karl Keirstead boosted his price target to $45 (from $33), representing about 18% worth of upside to yesterday's close. While contrarians might be turned off by the stock's strong rebound since its late-June plunge, Keirstead thinks there's more room to bounce given the strong growth momentum working in Oracle's favor.

Now what: According to Deutsche, Oracle's risk/reward trade-off remains attractive. "[T]here are really only two competing views of Oracle's applications business: that the rate of secular decline is material enough to cap Oracle's medium-term growth rate at below-consensus levels, or that it is a 'manageable problem' that can be offset by strength in the database business," noted Keirstead. "We embrace the latter view, as our field checks do not point to a massive migration of ERP customers and ORCL is finally pivoting aggressively to the cloud to protect its installed base. It is losing this battle, but at least it's stemming the losses." With the stock up nearly 20% over the past three months and trading at a 15-plus P/E, however, holding out for a wider margin of safety might be the prudent move at this point.

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