Analysts Stand by Oracle After Disappointing Earnings

In the coming fiscal year, Oracle expects to book between $1.5 billion and $2.0 billion of new SaaS (software as a service) and PaaS (platform as a service) business. There are consensus estimates of $3.00 in EPS on $39.16 billion in revenue for the 2016 fiscal year.

During this quarter, the board of directors declared a quarterly cash dividend of $0.15 per share on outstanding common stock.

Revenue for the fiscal fourth-quarter fell 5% from $11.33 billion in the same period of the previous year, but it would have been up 3% without the strengthening dollar.

In terms of its segments Oracle reported the following results (note that comparisons are sequential):

• Software and Cloud Revenues were $8.4 billion, down 6%, but up 2% in constant currency.
• Cloud SaaS and PaaS revenues were $416 million, growing 29%, and up 35% in constant currency.
• Cloud infrastructure as a service (IaaS) revenues were $160 million, increasing 25%, and up 31% in constant currency.
• Hardware Systems Revenues were $1.4 billion, down 4%, but up 5% in constant currency.

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Larry Ellison, chairman and CTO of Oracle, compared his company’s growth in SaaS and PaaS to competitor Salesforce.com Inc. (NYSE: CRM):

That means Oracle would sell more new SaaS and PaaS business than salesforce.com plans to sell in their current fiscal year — the only remaining question is how much more. Oracle’s planned SaaS and PaaS revenue growth rate is around 60% in constant currency; salesforce.com has a planned growth rate of around 20%. When you contrast those growth rates it becomes clear that Oracle is on its way to becoming the world’s largest enterprise cloud company.

Mark Hurd, CEO of Oracle, said:

Coming into Q4, we forecast selling $300 million of new SaaS and PaaS annual recurring revenue. We dramatically beat that forecast by selling a cloud industry all-time-record amount of $426 million of new SaaS and PaaS business. That is a year-over-year bookings growth rate of over 200%. As our multi-billion dollar cloud business gets bigger, our SaaS and PaaS revenue growth rates are on their way up to 60% in constant currency. Compare this to our primary cloud competitors’ whose own revenue growth forecasts are on their way down to 44% and 22%.

At the end of the quarter, Oracle’s balance sheet had $54.4 billion in cash, cash equivalents and short-term investments. At the same time in the previous year, the company had $38.8 billion in cash, cash equivalents and short-term investments.

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The stock was maintained as Outperform with a $50 target at Credit Suisse, with the firm noting that Oracle is booking its way to cloud growth while it is lowering estimates. Jefferies maintained its Hold rating and $41.00 price target. Bank of America Merrill Lynch reiterated its Buy and $48 price objective, with the note that its drop is overdone.

Shares of Oracle closed Wednesday up 0.6% at $44.91 on a 52-week trading range of $35.82 to $46.71. In premarket trading Thursday, shares were down 6.2% at $42.19. The stock has a consensus analyst price target of $46.50.