Analyst Looking For A Rebound In Oracle As Stock 'So Disliked' Heading Into Q2 Results

• The share price of Oracle Corporation ORCL has declined 16.28 percent year-to-date, falling almost to its 52 week low, at $35.44 on September 28.
• Richard Davis of Canaccord Genuity has maintained a Buy rating on the company, with a price target of $44.
• Davis believes that the stock is “so disliked by investors that unless the company falls flat on its face on this print and guide, the shares could inch their way back toward $40.”

Analyst Richard Davis mentioned that Oracle is scheduled to report its 2Q16 results on December 16, after market close. The company has guided to slowing in total software and cloud growth from 6-8 percent in 1Q to 0-2 percent in Q2, on a constant currency basis.

Davis believes that this “reflects the continued pivot away from paid-up licenses,” while mentioning that the guidance appears conservative.

Cloud SaaS & PaaS revenue growth is expected to accelerate from the mid-30 percent year-over-year to about 50 percent in the last two fiscal quarters.

While expressing concern regarding the market decline towards the end of 2015, Davis pointed out that “checks broadly indicate that demand for new software and upgrades of existing systems remains robust.”

Given that Oracle is exposed to both dynamics, if the company is able to avoid too much cannibalization, its business is expected to remain reasonably stable.