Why This Analyst Is Still on the Sidelines About Oracle

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Oracle Corp. (NYSE: ORCL) kicked off its analyst meeting by reiterating its expectation to accelerate revenues in the 2020 fiscal year and even more in the following year. The main theme of this day is that Oracle is “putting all the pieces together to enable customers to be successful in the cloud.”

Despite these lofty goals and expectations, one analyst remained sidelined on Oracle. Wedbush reiterated a Neutral rating with a $55 price target, implying upside of 3% from the most recent closing price of $53.37.

Specifically, Wedbush said that it remains on the sidelines looking for meaningful progress in rebooting database growth (either cloud/autonomous or BYOL) on a more sustained basis.

The boutique investment firm noted that Oracle positions itself as the only company that can provide a fully integrated stack that includes infrastructure, autonomous database, applications and artificial intelligence. Wedbush is more convinced of Oracle’s progress in cloud applications than cloud infrastructure, as management’s expectations for noticeable progress continue to be dashed by lumpy quarterly performance and relatively flat infrastructure revenue.

In the report, Wedbush detailed:

Oracle has transitioned nearly 100% of its applications to the cloud, and this week’s product and partnership announcements are uniformly focused on cloud. Now, ORCL is using itself as its main reference for cloud prospects with a series of programs called Oracle@Oracle. Also, Oracle has a large base of customer references for each application and it working to transition customers’ entire application + database stacks to Oracle Cloud. Since acquiring NetSuite, Oracle has expanded NetSuite to 30+ countries, 50+ new industries, and delivered 32% ERP growth (FY19). Oracle added AI/ML capabilities in nearly every app category (sales, marketing, supply chain, financials, HR).

Shares of Oracle traded up less than 1% Friday morning to $53.75, in a 52-week range of $42.40 to $60.50. The consensus price target is $56.47.


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