NEW YORK (TheStreet) -- Oracle (ORCL - Get Report) couldn't have foreseen this: a tepid research report from Morgan Stanley released Thursday morning sent shares as much as 3.6% lower before drifting higher halfway through the session.
By midday, shares had shed 2.3% to $33.76 and daily volume had almost surpassed its three-month average trading volume of 16.9 million shares.
"Oracle looks fairly valued given our lack of conviction around forward catalysts," Morgan Stanley wrote in its report, downgrading shares to "equal-weight" from "overweight".
The investment firm removed its price target until evidence the company's cloud assets and database innovations can spark growth.
Morgan Stanley also said its call is not a reflection on the enterprise software developer's second quarter, figures for which are due for release Dec. 18.
"We do not believe estimates look overly demanding for 2Q even with the tough competition, as implied seasonality is 500bps below the 5-year average and FX is an incremental tailwind relative to guidance," Morgan Stanley analyst Keith Weiss explained.
Analysts surveyed by Thomson Reuters anticipate second-quarter net income of 67 cents a share for the period ended November. Revenue of $9.19 billion is expected.
TheStreet Ratings team has remained bullish, reiterating Oracle Corp as a Buy with a ratings score of A-. The team has this to say about their recommendation:
"We rate Oracle Corp (ORCL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity, attractive valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Oracle Corp has improved earnings per share by 14.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ORACLE CORP increased its bottom line by earning $2.26 a share vs. $1.97 a share in the prior year. This year, the market expects an improvement in earnings ($2.90 vs. $2.26).
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Software industry and the overall market, ORACLE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for ORACLE CORP is currently very high, coming in at 82.29%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 26.17% is above that of the industry average.
- You can view the full analysis from the report here: ORCL Ratings Report