Canaccord Sees Bullish Psychology On Oracle Returning

Oracle Corporation ORCL report a robust quarter, with strong overall cloud performance. Canaccord Genuity’s Richard Davis maintained a Buy rating on the company, with a price target of $45.

Bullish Momentum to Return

“We acknowledge, but believe investor fear over Oracle’s revenue recognition is almost certainly overblown. Last night’s good print and guide is the first step in regaining investor optimism that was blossoming just three months ago,” Davis mentioned.

The analyst expects the “bullish psychological momentum” to return to the stock, with the multiple expanding at least one or two points. Therefore, the stock offers an attractive near-term investment option.

Related Link: Oracle Results Applauded By Barclays

Robust Cloud Results

Oracle reported strong cloud results, with SaaS and PaaS revenue growth accelerating to 67 percent year-on-year and 17 percent, sequentially.

The customer metrics were also impressive, with 1,640 new SaaS customers, representing record customer expansion of 917. The company also added 2,005 new PaaS customers.

Davis believes “the second generation of the IaaS data center is bringing on customers and is expected to help bolster growth in that cloud segment, which has lagged its SaaS and PaaS counterparts.”

The analyst expects SaaS and PaaS gross margins to continue to grow steadily throughout 2016 and for FX to be less of a headwind.

Oracle guided to cloud SaaS and PaaS growth for Q1 and FY17 of 75-80 percent, driven by recent M&A, as well as improved organic growth.