In a report issued Sunday, Wedbush analysts Steve Koenig and Jae Cho take a look at Oracle Corporation ORCL, reiterating a Neutral rating and a $42 price target on the back of "stubbornly high" expectations.
Short-Term Expectations
After the recent guide down for the fourth quarter, the analysts expected lower Street expectations to enable the stock to become more constructive. However, this was not the case.
Even after adjusting for currency, the consensus estimate for fiscal 2016 implies an "improbable" revenue growth rate of 5 percent in organic, constant-currency terms, the specialists explain, highlighting that the company "hasn't generated this kind of growth since the FY11 rebound year."
Looking Ahead
They expect Oracle's margins to be flat or down in 2016 "due to its heavy investments in the cloud and an industry-wide compression in the software value chain." While they point out that cloud investments may enable the company to stay relevant, they think "incremental profitability is likely to prove elusive, despite ORCL's scale economies."
The firm models, for 2015, EPS of $2.88, on revenue of $38.387 billion. For 2016, they project earnings of $2.92 per share, on revenue of $37.828 billion.
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