Oracle Investors Pleased With Q4 Revenue Beat, But Analysts Sidelined

Oracle Corporation ORCL stock continued to soar on Thursday after the software company reported a revenue beat and issued bullish guidance the day before. 

Some sell-side analysts weren’t impressed enough to leave the sidelines, saying they’re waiting to see if the company can deliver such results consistently.

Oracle’s fourth-quarter revenue of $11.1 billion topped guidance and Street estimates, driven by 6% year-over-year growth in cloud and license revenue. Infrastructure revenue grew 7%, but against an easy compare with last year’s fourth quarter.

The company projected double-digit EPS growth and 2020 growth that beat last year's. 

The Analysts

BMO Capital Markets analyst Keith Bachman maintained a Market Perform rating on Oracle and raised the target price from $53 to $59.

Wedbush analyst Steven Koenig maintained at Neutral, while boosting the target price from $52 to $55.

JMP Securities analyst Patrick Walravens maintained a Market Perform rating.

Bank of America Merrill Lynch analyst Kash Rangan reiterated a Neutral stance and raised the target price from $57 to $60.

The Takeaways 

While the quarter was solid, the upside was driven by Oracle’s infrastructure business, which was up 7% year-over-year but aided by an easy comparison, Bachman said in a Wednesday note.

Application growth slowed, the analyst said. That, and inconsistent performance from Oracle over the past few years, kept the analyst on the sidelines, he said. 

Wedbush’s Koenig had some praise for strong fourth-quarter database license sales, but said the results looked more like just good execution than representing an inflection in the infrastructure business, or overall revenue.

“We think it’s better to take a 'show me' stance towards progress with the infrastructure and cloud businesses,” the analyst said. 

Oracle's Valuation

JMP’s Walravens said it was a "nice revenue beat."

JMP did up the EPS estimates for the first quarter and the years 2020 and 2021. Oracle is fairly valued, the analyst said. 

BofA's Rangan said the stock is valued a little low, but also said he’s in wait-and-see mode.

“The pace of progress is not enough to keep us positive in the near-term,” the analyst said.

“While both partner and customer sentiment is improving, it will take longer for progress to impact the numbers than we expected.”

Price Action

Oracle shares were up 7.61% at $56.71 at the time of publication Thursday. 

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Photo courtesy of Oracle.