Technology

Why One Analyst Is Souring on Oracle Ahead of Earnings

Chris Lange

Published: June 18, 2019 2:35 pm

Last Updated: January 6, 2020 3:38 am

Oracle Corp. (NYSE: ORCL) is set to release its most recent quarterly results after the markets close Wednesday. The consensus estimates are calling for $1.07 in earnings per share (EPS) and $10.95 billion in revenue. The fiscal fourth quarter from last year had $0.99 in EPS and $11.26 billion in revenue.

Ahead of the report one key analyst soured on Oracle—specifically Macquarie’s Sarah Hindlian. Overall Oracle was downgraded to a Neutral rating from Outperform, citing concerns about the firm’s outlook and likely winding down its aggressive buyback program. The price target was also cut to $55 from $56.

Hindlian writes in a research note that her checks find Oracle had a “struggle” in the final weeks of the quarter. She detailed that partners rushed to discount orders up until the final days, yet Macquarie believes Oracle has a very easy bar and comp. Although there are several leading partners seeing softening of the pipeline, it’s Macquarie’s belief that there is a step function lower in demand for Oracle and it is appropriate to re-evaluate.

She went on to say:

We are downgrading shares of Oracle to Neutral following partner commentary suggesting significantly softening Oracle practices. We think Oracle has sig. value it can unlock especially in Cloud ERP, and Autonomous DB, and note easy comps for the fiscal fourth quarter. However, we see risks to guidance and shares as the $10 billion buyback may wind down in the next 1-2 quarters.

A few other analysts weighed in on Oracle as well:

• JPMorgan has a Neutral rating with a $53 price target.
• UBS Group has a Neutral rating with a $54 price target.
• Morgan Stanley has an Equal Weight rating with a $59 price target.
• Credit Suisse has a Buy rating with a $60 price target

Overall Oracle has outperformed the broad markets with the stock up nearly 18% year to date. In the past 52 weeks, the stock is up closer to 16%.

Shares of Oracle were last seen at $53.24, with a 52-week range of $42.40 to $55.53. The consensus analyst price target is $53.41.