How Analysts Rate Oracle After Earnings

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Oracle Corp. (NYSE: ORCL) reported its fiscal third-quarter financial results after the markets closed Tuesday. Many consider this to be a spectacular quarter, on both the analyst and investor sides. Following the report, a few analysts decided to give their two cents on the stock.

The company said it had $0.64 in earnings per share (EPS) on $9.01 billion in revenue, compared to consensus estimates from Thomson Reuters that called for $0.62 in EPS on revenue of $9.12 billion. In the same period of the previous year, Oracle posted EPS of $0.68 and $9.33 billion in revenue.

Short-term deferred revenues were $6.9 billion, up 7% in U.S. dollars and up 11% in constant currency, compared with a year ago.

During this quarter, the board of directors authorized the repurchase of up to an additional $10 billion of common stock under the existing plan. The board also declared a quarterly cash dividend of $0.15 per share, which will be payable April 28 for shareholders of record on April 14.

Oppenheimer detailed in its report:

While fiscal third-quarter results do not change our fundamental concerns on Oracle (i.e., infrastructure business commoditization, tough SaaS competition, below market average EPS growth), we are less bearish on the stock near term with estimate risks somewhat mitigated from easier year/year comparisons over the next two quarters, EPS growth returning next quarter, and with software investors positioned defensively this year. Maintain Perform.

Merrill Lynch saw this earnings report as consistent with its preview with the cloud metrics getting better. There is potential to rerate this stock higher for the cloud. In terms of the investment rational, the license decline of 9% to 10% in the past two quarters is self-induced near-term phenomenon in light of the cloud transition. A second-quarter and second-half implied mid-teens license decline could reset the bar and limit stock volatility. The firm thinks the risk is to the upside if the company can deliver on lowered license expectations. As a result Merrill Lynch reiterated a Buy rating with a $48 price target.

Credit Suisse has an Outperform rating with a $50 price target. The brokerage firm explained in its report:

Despite reporting lower-than-expected license revenue of $1.68 billion (consensus of $1.72 billion), Oracle reported strong SaaS/PaaS revenue of $585 million (consensus of $555 million), a year-over-year increase of 61% (CC) versus guidance of 49-53% (CC). Additionally, management announced 942 SaaS customer wins and 1,143 PaaS customer wins, underscoring our thesis that Oracle continues to gain cloud traction. For fiscal 2016, we are adjusting our revenue outlook from $37.284 billion to $36.941 billion and leaving our EPS estimate of $2.61 unchanged.

A few other analysts weighed in on Oracle just after the earnings report:

  • BMO Capital Markets has a Market Perform rating and raised its price target to $45 from $52.
  • Canaccord Genuity reiterated a Buy rating with a $45 price target.
  • Goldman Sachs has a Buy rating with a $48 price target.
  • Pacific Crest reiterated a Hold rating.

Shares of Oracle were last trading up about 5% at $40.64, with a consensus analyst price target of $43.50 and a 52-week trading range of $33.13 to $45.24.