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Oracle Gains Before Earnings; Barclays Likes IT-Spending Outlook

Oracle is set to report third-quarter earnings on Wednesday. Barclays upgraded the software major, partly on the IT-spending outlook.
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Shares of Oracle  (ORCL)  were up on Friday placing the cloud infrastructure technologies company's stock on pace for its best weekly gain in nearly 12 months, following an upgrade from Barclays. 

Barclays analyst Raimo Lenschow upgraded the stock to overweight from equal weight, thanks to an improving cloud mix and an improved spending environment for information technology. 

He also raised his price target on the Austin company to $80 from $66 per share. 

Oracle shares at last check were up 7.3% to $70.40, putting the stock on pace to gain 9.1% this week vs. a 9.2% increase in the week ending March 27, 2020, according to Bloomberg calculations. 

"We see accelerating growth for Oracle, which in our view will drive multiple expansion, hence our upgrade," Lenschow said. 

"The two factors here are an improving cloud mix and a better IT spend environment. Oracle has been ignored by investors for a while." 

The company has been outperforming the market the past few weeks, thanks in part to a Barron's cover story that said the stock is undervalued. 

Barclays says the stage is set for Oracle's growth businesses to more than offset the headwinds more mature products have seen recently. 

Oracle trades at about 13 times estimated 2022 free cash flow. Barclays's new price target moves the valuation on that basis up to 15 times future FCF. 

Oracle is scheduled to report its quarterly earnings next Wednesday. The company issued internal earnings guidance between $1.09 and $1.13 per share. 

Analysts are expecting earnings of $1.11 a share on revenue of $10.05 billion, according to FactSet.