Morgan Stanley On Oracle: 'See You In The Spring Time,' Downgrades To Equal-weight

• Oracle Corporation ORCL has seen an 11.23 percent decline in its share price year-to-date, from a high of $44.97 on December 31. 2014.
• Morgan Stanley’s Keith Weiss has downgraded the rating on the company from Overweight to Equal-weight, with a price target of $45.
• Weiss believes that the stock would see limited upside until there was more clarity on key catalysts.

Analyst Keith Weiss elaborated that the robust cloud bookings “failed to prove the catalyst we hoped, and indicators in the database business have been mixed.”

Although the company saw robust bookings growth in its SaaS & PaaS business through CY15, “the positive bookings have failed to drive the multiple expansion we've seen in other cloud transition stories,” Weiss said.

Weiss explained that this failure was driven by lengthening translation of the robust bookings into revenue growth, higher than expected impact of the cloud transition on Oracle’s income statement and lack of clarity regarding the “depth and duration” of such impact.

In addition, “the 12c database cycle has yet to materially ramp up and provide support to software license revenue growth,” the Morgan Stanley report stated, while mentioning that “recent data points have given investors increasing cause for concern around the durability of the core database business.”

Weiss expects cloud revenue growth to begin to move up in FY3Q16, but it represents less than 5 percent of the company’s business.

Given Oracle’s modest opex growth, ongoing aggressive share buybacks and a 1.6 percent dividend yield, Weiss expects the company to be able to deliver 10-12 percent total return to shareholders, as compared to the relatively in-line overall market.