The Bar Is Set Low For Oracle's Q1 Results

With Oracle Corporation's ORCL Q1 earnings release, analyst Brent Thill of UBS took a look at the expectations while noting the bar is "low." The firm maintained its Buy rating and $44 price target on shares, as they are trading at a valuation in line with the historical range.

Positives

First, the analyst is "positive" on FY17 with it "witnessing some of the easiest lic growth comps since at least '03." Second, the firm said with the recent Opower and Textura deals "buoying" financials, this has advanced the vertical solutions portfolio. Third, the upcoming user conference/analyst will add "clarity" to Cloud momentum and updates on the database 12CR2 release.

Related Link: Voices From The Street On Oracle's Upcoming Q1; Marc Benioff Calls NetSuite Acquisition 'Desperation Move'

Concerns

Combined with Oracle's low valuation of 14x FY17 estimates, the "bar looks low" for the company but UBS believes investors do have some concerns.

First, the "ARR trajectory" given F4Q's $140 million miss. Second, the "ongoing demand softness" in the database business with at ~50 percent of lic revenues is "likely to continue the segment drag." Third, the "incremental" foreign exchange risk because of the 15 percent GBP devaluation somewhat "neutralized" by the 21 percent JPY appreciation.

Further, UBS also thinks cloud billings growth and the cloud revenues outlook are key.