It's Time To Revisit The Question Of Whether Oracle Can Hit Double-Digit Earnings Growth

Oracle CorporationORCLearnings report. But the results weren't good enough for some analysts to turn bullish on the name. Morgan Stanley's Keith Weiss maintains an Equal-Weight rating on Oracle's stock with an unchanged $47 price target which implies downside from current levels of around $51.50. While Oracle's momentum in the 12c cycle could make a double-digit EPS growth rate easier in fiscal 2018, this doesn't change the analyst's view of a "difficult secular positioning" moving forward.

One of the more concerning aspects of Oracle's business stems from a "sharp" drop off in Cloud Billing growth, Weiss stated. Specifically, the unit's organic growth rate fell from around 60 percent in the third quarter to a mid-teens rate in the fourth quarter.

A more moderate decline in license revenues and a sequential rebound in support revenues did result in the analyst to model a 3.2-percent revenue growth rate in fiscal 2018 to $39.1 billion but at the same time a full-year, double-digit earnings per share growth remains "aggressive."

The analyst is also modeling a gross margin decline of 40 basis points in 2018, an operating margin of 42.9 percent and operating income dollars growth of 4 percent. When taking all of this into considerations, Weiss is modeling Oracle's EPS in fiscal 2018 to rise just 3 percent to $2.82 — up from a prior estimate of $2.75 per share but "well short" of guidance looking for a double-digit rate.

At last check, shares of Oracle were up 9.82 percent at $50.89.

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