Analysts Raise Oracle’s (ORCL) Price Target Following Strong Quarterly Results

Jacques Potts

On Thursday, after the closing bell, Oracle reported better-than-expected earnings results with its fiscal year 2020 first-quarter earnings release. On the top line, revenues of $9.4 billion exceeded expectations of $9.19 billion. On the bottom line, adjusted earnings per share of $0.93 exceeded expectations of $0.86 per share.

Additionally, Oracle reported that its Cloud Services and License Support revenues for the quarter were $6.9 billion which were up 2% from last year.

"Q1 was fantastic with total revenue beating guidance by more than $150 million, and non-GAAP earnings per share beating guidance by $0.07," said Oracle CEO, Safra Catz. "Our cloud applications businesses continued their rapid revenue growth with Fusion ERP up 33% and NetSuite ERP up 23%. We now have 7,300 Fusion ERP customers and 23,000 NetSuite ERP customers in the Oracle Cloud. Our infrastructure businesses are also growing rapidly as revenue from Zoom more than doubled from Q4 last year to Q1 in this year. I have a high level of confidence that our revenue will accelerate as we move on past COVID-19."

Looking ahead, management stated on the call: “assuming current exchange rates remain the same as they are now, currency should have a slightly less than 1% positive impact on total revenue and potentially $0.02 positive effect on EPS for Q2. So with that, total revenues are expected to grow between 1% to 3% in U.S. dollars.”

After Oracle reported its earnings, several analysts raised their price targets on the stock.

Analysts at Jefferies raised the firm's price target on Oracle to $65 (from $55), however, reiterated their Hold rating stating: “Valuation is undemanding at 15x our updated FY21 FCF est. (VMW at 16x), though the lack of a [near-term] catalyst keeps us Neutral. Prefer MSFT in large-cap software.”

Meanwhile, at Barclays, the analysts raised the firm's price target on Oracle to $59 (from $52) and also kept an Equal Weight rating on the shares stating: “we believe investors would like to see more tangible evidence of accelerating recurring segment growth for a sustained rally. Hence, we reiterate our EW rating”.

Credit Suisse is more optimistic on the company’s outlook, raising their price target on Oracle to $66 (from $62) while reiterating an Outperform rating on the shares and commenting that “Oracle reported solid F1Q21 results, with healthy cloud momentum, accompanied by surprising

strength in both license and hardware revenue (likely due to strong backlog).” Further supporting their bullish view, the analysts noted that “Ultimately, against a turbulent backdrop, results were strong across the board with revenue, operating income, EPS, and FCF all exceeding expectations. F2Q was guided slightly above Street and commentary suggests rebounding business momentum with confidence in acceleration post-COVID-19.”

JP Morgan analysts followed suit and raised the firm’s price target on Oracle to $61 (from $57) and kept an Overweight rating on the shares while stating “As we move past the COVID-19 impacts, we expect Oracle to continue to show resiliency as it starts to benefit from the favorable mix shift in its business, and as such, we expect the multiple to rerate higher from current levels”.

ORCL stock shot up over 4% in pre-market trading(at the time of this report) after Q2 earnings beat expectations. What did you think of the quarter? Let us know in the comment section below!

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Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself [ourselves], and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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Comments (1)
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Oracle beating exception doesn't come as a surprise, the pandemic has greatly increased the demand for cloud-computing services