Along with disciplined spending and lower tax rate, hardware and services misses in the third quarter results were handily offset by Cloud and a surprise license upside. Oracle also saw healthy ARR growth at 73 percent.
Analyst’s Take
UBS analyst Fatima Boolani said there are indications that more operating efficiency can be achieved and gave the following five points that would help sustain positive sentiment for the stock.
1) “Healthy ARR growth +73% cc - renders the reiterated FY $2B +40% y/y target more achievable.”
2) “Indications more operating efficiency can be had (headcount -800 q/q the largest since May'10) - still targeting double-digit EPS growth in FY18 by net income improvement vs. buyback driven share count reduction.”
3) “Demonstrable balance sheet strength - ORCL announced an unanticipated +27% dividend increase with results.”
4) “Reasonable valuation and
5) “Optionality from tax reform.”
“[W]e think shares could garner incremental interest with inflecting fundamentals providing the basis for ORCL's valuation disconnect to narrow vs. peers and market multiples,” Boolani wrote in a note.
Despite bears likely to point to organic Cloud growth deceleration and mixed cash flow, Boolani raised her price target to $48 from $45.
At last check, shares of Oracle rose 7.41 percent to $46.24 after setting a new all-time high of $46.99.
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