Technology

Is Wall Street Giving Oracle Enough Credit for Future Growth?

Chris Lange

Published: June 20, 2019 10:50 am

Last Updated: January 6, 2020 3:34 am

Oracle Corp. (NYSE: ORCL) reported its most recent quarterly results after markets closed Wednesday. Ultimately this was a record quarter for the firm with its shares hitting an all-time high in Thursday’s session. As a result, analysts were quick to hop on this train.

24/7 Wall St. has included some highlights from its earnings report as well as what analysts are saying after the fact.

The firm said that it had $1.16 in earnings per share (EPS) and $11.14 billion in revenue, compared with consensus estimates that called for $1.07 in EPS and $10.95 billion in revenue. The fiscal second quarter from last year had $0.99 in EPS and $11.26 billion in revenue.

Total quarterly revenues increased by 1% and by 4% in constant currency compared to the same period last year. Cloud services and license support revenues totaled $6.8 billion, while cloud license and on-premise license revenues were $2.5 billion. Total cloud services and license support plus cloud license and on-premise license revenues were $9.3 billion, up 3% in U.S. dollars and 6% in constant currency.

At the same time, short-term deferred revenues were $8.4 billion. Operating cash flow for fiscal 2019 was $14.6 billion.

Merrill Lynch reiterated a neutral rating for the stock, but raised its price objective to $60 from $57. The brokerage firm detailed in its report:

Autonomous DB [database] encouraging, but still waiting for SaaS [Software as a service] … we would have liked to see better performance in cloud services and license support, which continued to decelerate to 3% year over year in constant currency, implying sustained flat/deceleration in cloud SaaS/PaaS/IaaS and/or maintenance. Moreover, total we believe revs would need to accelerate to mid-high single digits for the stock to rerate – 5-6% organic software rev growth will require SaaS/PaaS/IaaS growth of 35-40% (from SaaS at 15-20%; PaaS/IaaS at low 20s today), which will be challenging.

Wedbush Securities maintained its neutral rating, but raised its prior $52 target price to $55. The firm said that it is remaining on the sidelines as it doesn’t see an inflection point in its infrastructure or cloud positions.

Other analysts weighed in saying:

• Raymond James reiterated an outperform rating and raised its price target to $61 from $57.
• RBC Capital Markets reiterated a sector perform rating and raised its price target to $59 from $57.
• Wells Fargo reiterated an outperform rating and raised its price target to $65 from $60.
• Barclays reiterated an equal weight and raised its price target to $59 from $55.
• Jefferies reiterated a buy rating and raised its price target to $66 from $61.

Overall, Oracle shares have more or less performed in line with the broad markets with the stock up nearly 17% year to date. In the past 52 weeks, the stock is up closer to 13%.

Shares of Oracle were last seen up nearly 8% at $56.79, with a 52-week range of $42.40 to $57.24. The consensus price target is $53.41.