The firm also set a $47 price target on the company's shares, a potential 9% upside from the stock's current price.
While the firm applauded Oracle's innovation in the cloud computing and sees the company as one of the industry's leaders in cloud returns computing, weak third quarter results make the firm cautious.
"Oracle's ability to integrate all components, from storage to database and all the way to applications, creates an inherent advantage for all subscribers. Oracle remains the world's most popular enterprise database with approximately 45% of the database market, forcing other vendors to interoperate," analysts said.
"However, the company reported its F3Q15 results with weak revenue and flat EPS growth. The analyst believes that the revenue weakness was due to strong FX headwinds, which impact revenue growth by 6%," they said.
TheStreet Ratings team rates ORACLE CORP as a Buy with a ratings score of A. TheStreet Ratings 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 revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ORCL's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 0.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- ORACLE CORP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ORACLE CORP increased its bottom line by earning $2.39 versus $2.26 in the prior year. This year, the market expects an improvement in earnings ($2.86 versus $2.39).
- ORCL's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.48 is very high and demonstrates very strong liquidity.
- After a year of stock price fluctuations, the net result is that ORCL's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: ORCL Ratings Report