JMP Cuts Oracle To Market Underperform, Sets $31 Price Target

• Oracle Corporation ORCL shares are down 17 percent year-to-date, sliding from around $45 in mid-June to around $35 in August.
• JMP Securities’ Patrick Walravens downgraded the rating on the company, while establishing a price target of $31.
• There are several concerns surrounding Oracle, which are partly reflected in the company having missed expectations several times, Walravens noted.

Analyst Patrick Walravens expressed concern regarding increased competition from Amazon Web Services, or AWS, with its database business achieving a run rate of $1 billion and usage growing at 127 percent y/y. Moreover, AWS was recently recognized as a leader in the 2015 Gartner Magic Quadrant for Operational Databases.

Walravens added that there was “increasing customer dissatisfaction” with Oracle’s pricing and auditing policies. Moreover, some of the company’s Cloud deals appear to have resulted from aggressive sales incentives and “may not go live.”

Oracle seems to be worried about its revenue levels, since it is taking new expense control initiatives like announcing a “Winter Break” from December 25 to January 1, which would enable the company to reduce accrued vacation.

Some of these concerns are reflected in the fact that Oracle has fallen short of the consensus revenue estimate in seven of the previous nine quarters. Moreover, the company’s non-GAAP EPS has been lower than the consensus estimate in four of the last nine quarters.

The non-GAAP EPS for FY17 and FY18 have been reduced from $2.88 to $2.80 and from $3.10 to $3.00, respectively.