Analysts Warming to Oracle More and More (ORCL, IBM, SAP)

Oracle Corp. (NASDAQ: ORCL) has just completed its acquisition of Sun Microsystems, and so far we are seeing analysts overwhelmingly in favor of the stock based on the most recent calls or on recent price changes.  More importantly, the price targets were raised along with the earnings expectations for beyond 2010.  There are some caveats and some side-bar issues here, but the pointed direction or bias continues to be a favorable  one.

Last week we saw Friedman, Billings & Ramsey hike its old $27 target up to $30, while this morning we saw Credit Suisse resume coverage with an “Outperform” rating with a $30 price target.  We have also seen Gartner issue a  “Strong Positive” alert in Oracle.

What is happening is that Oracle is becoming more and more like IBM (NYSE: IBM) and less and like SAP AG (NYSE: SAP).  There are some holes in the IBM analogy, but the company talks almost every quarter about how it is taking more and more market share away from SAP in just about every category. Big Blue is expected to post almost $100 billion in 2010 revenue…. SAP is expected to report $15.79 billion in 2010 revenue.  Oracle has a May-end for its fiscal year, so a blended 2010 and 2011 fiscal estimate is close to $31 billion in revenues.  Analysts have increased their earnings targets at Oracle.  It is also worth noting that Oracle is one of the few companies that has announced new hires, at least sans-cuts at Sun.

In recent weeks, despite the market sell-off, Oracle’s price target for one-year out has also grown.  That average price target is now just north of $28.00 and the highest target is now $32.00.

At $1.58 EPS and $26.8 billion in revenues for fiscal-2010, Oracle’s current year multiples are an implied 14.6-times earnings and 4.3-times revenues.  At $1.88 EPS and $35.07 billion in fiscal-2011 revenues, its forward-year multiples are 12.3-times earnings and 3.3-times revenues.

At $23.10, Oracle’s 52-week trading range is $13.80 to $25.65.  Before shares crossed $25.00 in recent weeks, that was not just a 52-week high.  Those were highs going back to January 2001.

JON C. OGG