Oracle Corporation (ORCL)

[DiscoverGold]

Analysts Highlight Key Takeaways from Oracle's Analyst Day
By: Investing.com | October 21, 2022

Oracle Corp. (NYSE:ORCL) shares closed 4.45% higher on Thursday after investors reflected positively on the new ambitious long-term revenue targets laid out at yesterday's Financial Analyst Day.

Oracle said it expects to record $65 billion in revenue, 45% non-GAAP operating margins, and >10% annual EPS growth by FY2026. These long-term financial targets came in at least 5% above Street expectations for 2026.

Shares were also boosted by Piper Sandler's upgrade to Neutral from Underweight with a price target of $70 per share. Analysts said the "risk-reward appears more balanced near-term."

Here's what Oracle analysts have to say about the new long-term financial targets:

Stifel's analysts: "The organic revenue growth goal comes to an 11.25% CAGR over the next 4 years, a dramatic step-up from the current mid-single digit CC growth the company has posted over the last few years. En route to this goal we believe Oracle has assumed meaningful share gains within its Infrastructure segment which we believe could prove optimistic given the degree to which Oracle is behind other IaaS vendors as the Cloud Apps business has already been posting healthy growth rates. Overall we believe that Oracle will likely continue to bleed Infrastructure marketshare, but sustain current levels of FCF given management's aggressive operational focus."

Guggenheim's analysts (raise PT to $115, designates ORCL as Best Idea): "It's been many years since we've attended an Oracle event with so much excitement around technology, culture (yes, you read that right), growth, and importantly, profit. Even skeptical investors would acknowledge the technology acumen of Oracle… We continue to believe in this story."

Morgan Stanley (NYSE:MS)'s analysts: "Durability of strategic-back office growth and a long runway for OCI unlock management's confidence to commit to LT targets of $65 billion in rev and >45% op margin by FY26. While management and partners expressed confidence in Cloud durability, we await more evidence in our broader market checks."

Goldman Sachs’ analysts (raise PT to $72 from $70): "While we're encouraged by Oracle's expectation to return to double-digit revenue growth (~10% CAGR through F26), the target comes at a time when software companies are becoming more prudent with 2H/FY guidance due to a worsening macro environment (slowing net new business, deal cycle elongation, FX headwinds). We note that the F26 guidance implies Street revenue estimates in F24 could be revised higher by >3 pp, which we believe could leave investors questioning their attainability in the event of a potential recession in the coming months (back-office/ERP could be most susceptible, ~50% of organic cloud revenue). Oracle's continued underperformance in its core database market also remains a potent risk to achieving its long-term target, in our view."

Bank of America (NYSE:BAC)'s analysts: "We are encouraged by the bullish expectation for sustained cloud growth, though key initiatives to achieve these targets remain a work in progress, namely datacenter expansion (building 9 additional data centers on top of the 40 today) and integration of vertical application to cloud offerings such as Fusion and NetSuite… However, we maintain our Neutral view pending more evidence of more meaningful acceleration and a clear path back to double digit EPS growth from datacenter scale."

Read Full Story »»»

DiscoverGold