Oracle Story 'On Track,' Analyst Says

In a report published Thursday, analysts at DA Davidson reiterated their Buy rating on Oracle Corporation (NYSE: ORCL). The price target has been maintained at $51. While the company's fundamentals remain "on track," the strengthening of the US dollar against the euro is likely to adversely impact profits.The U.S. dollar has strengthened against the euro since the company started its 4Q15 on March 1 from €0.892 EUR/USD to $1.121 USD/EUR to $1.075 on April 22, marking an appreciation of 4.3 percent. Since Oracle's expenses occur in U.S. dollars, converting foreign currency revenues to the strengthened dollar could impact profits."We note that 30.2% of FY3Q15 revenue was generated in the EMEA region, while 14.8% was derived in the Asia Pacific region," the analysts said. The EUR/USD has depreciated 26.8 percent from FY2Q14 to FY4Q15, year-to-date. The JPY/USD has depreciated 17.5 percent during the same period."Consequently, we are slightly reducing estimates solely due to currency. Our new estimates contemplate the currency headwind to constant currency guidance quarter to date," the analysts explained.DA Davidson has revised its FY4Q15 revenue estimate to a decline 1.8 percent, year-on-year, to $11,118 million. The non-GAAP EPS estimate has been revised to $0.89. The revenue and non-GAAP EPS estimates for FY2016 have been lowered to $39,512 million and $3.08, respectively."We believe fundamentals remain on track in what is traditionally ORCL's seasonally strongest quarter. Our research indicates the company's SaaS and PaaS offerings continue to gain customer traction and mindshare, particularly in Europe, where we note that ORCL faces less competition," the analysts added.