Oracle Shares Jump As Cloud Acceleration + Database Cycle Ahead Causes This Analyst To Upgrade To Outperform

In a report issued Monday morning, RBC Capital Markets analyst Ross MacMillan upgraded shares of Oracle Corporation ORCL from Sector Perform to Outperform.

The Upgrade And PT Adjustment

The upgrade seeks to reflect a more bullish view on the company's cloud growth (both applications and platform) and a reiteration of the firm's belief that "the database business can show improving fundamentals over the next 12-18 months as 12C adoption accelerates."

The price target was also raised from $48 to $50. While estimates remained unchanged (EPS of $2.84 in 2015, $2.99 in 2016 and $3.29 in 2017), a higher multiple (15X FY17E EPS at end FY16 (May 2016) was used to reflect RBC's higher conviction of stronger underlying growth.

Related Link: Oracle Expectations Remain "Stubbornly High," According To Wedbush; Neutral Reiterated

What's Going On

According to the report, cloud applications and platform are accelerating: the firm takes "3 cuts at analyzing the business and all three suggests growth is accelerating [sic.]."

In addition, their takeaways from last week's HCM event suggest that "large cloud HCM customer references are building, the product portfolio is improving and the company's approach to selling cloud vs. on-premise has improved."

Finally, MacMillan reiterated his optimism on the database business.