2 Issues Oracle Investors Should Keep An Eye On

JMP Securities’ Patrick Walravens expressed concern regarding the longer-term performance of Oracle Corporation ORCL, against the backdrop of competition from Cloud platforms, such as Amazon.com, Inc. AMZN [AWS], Microsoft Corporation MSFT [Azure] and Alphabet Inc GOOGL [Google Cloud Platform].

Analyst Patrick Walravens maintained a Market Underperform rating for Oracle, with a price target of $31, saying that there were two immediate issues investors should keep an eye on:

1. According to some industry sources, Oracle plans to initiate sales restructuring on June 6. This would be the first Monday after the end of its fiscal year. The initiate may be related to the operational transformation that CEO Safra Catz mentioned during the earnings call in March.
2. A former Oracle Senior Finance Manager has filed a complaint in court alleging she was wrongfully terminated by the company on refusing to add “millions of dollars” in accruals to financial reports, with no “concrete or foreseeable” billing to support additions. This was allegedly meant to boost the financial reports of Oracle Cloud Services.

“While we are confident that Oracle takes compliance with accounting rules very seriously, we see potential risk here as Oracle’s push to the cloud resulted in the sales force often booing multiple-element arranges for which the accounting can be quite complex,” Walravens wrote.

JMP Securities has a Market Overweight rating on Amazon and Alphabet, with price targets of $775 and $904, respectively.