In this segment from the MarketFoolery podcast, host Chris Hill is joined by Motley Fool Asset Management's Bill Barker to consider Oracle's (NYSE:ORCL) fourth-quarter report, which featured a significant earnings beat. But its forecast was below expectations a bit, and the market cut its value by 9% on the day. For investors, the question is why the market is quite so pessimistic, and the Fools have some answers, as well as some insights on whether Wall Street is giving its transition efforts enough credit.

A full transcript follows the video.

This video was recorded on March 20, 2018.

Chris Hill: Third-quarter profits for Oracle came in higher than expected, I would say significantly higher than expected. But the forecast for Oracle's current quarter was lower than expected, and shares of Oracle are down about 9% this morning. How much lower than expected are we talking about here? This seems like a pretty big dip, considering the numbers they just put up in Q3.

Bill Barker: Yeah, the numbers in Q3 weren't bad. But it's just not compounding. The company has really not grown in the past five or six years. Doing about $37 million a year in revenue, same number it had back in 2012.

Hill: Wait. $37 billion. Did you say $37 million?

Barker: I may have. If so, I'm thankful that you've corrected me. [laughs]

Hill: I was like, I sure hope they're doing more than $37 million in revenue.

Barker: [laughs] Anyway. They're not growing a lot. The business is moving toward the cloud, and it's moving faster toward the cloud in the case of Oracle's competitors than Oracle itself is pulling off right now. That's what the concern is about, even though I think the software-as-a-service revenues are up 33% over the year. That's just given what they're guiding to. They're decreasing growth coming from that part of the business.

Hill: We've seen this story play out with other tech giants before where, for example, there was a point in time when Google, obviously, was making money hand-over-fist in search, and then the money they were making off of mobile search was lower, and as more people were doing mobile searches, they had to make the transition. We've seen this with IBM. We've seen this with plenty of tech companies, and the story goes something like this, "We have a goose that's laying golden eggs, but then, times change, and we have to transition and find another goose." When you look at Oracle's stock down 9-10% this morning and you see the transitions they're trying to make, do you look at this as a buying opportunity? Or do you want to see a couple more quarters of growth in things like software-as-a-service before you think this is actually a cheap enough stock?

Barker: Well, it's not an expensive stock, but it's probably fairly priced, given the inability to show top line growth over the last half-decade, now. What they're able to do is, as things transition, they're able to maintain that level of sales. The profitability is not getting any better, and they're buying back shares. They have knocked off about a quarter, nearly, of their shares over that time period. Earnings per share are up $2.25, up from $1.70 five years ago. But, that's not the kind of growth that I think other software investors are looking at. Microsoft has a bigger cloud presence, and they're growing faster than Oracle, so it's fairly easy to compare those two and say that investors are rightfully more enthusiastic in terms of the multiple they're willing to pay for Microsoft than they are for Oracle. Even though it is bigger, it's growing faster in that area.

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