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Why Oracle Expects 2018 To Be The Cloud Sales 'Tipping Point'

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Why Oracle Expects 2018 To Be The Cloud Sales 'Tipping Point'
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Argus analyst Joseph Bonner upgraded Oracle Corporation (NYSE: ORCL) to Buy with a $61 price target following strong fourth-quarter 2017 earning results Wednesday.

The company’s non-GAAP diluted EPS rose 10 percent year-over-year to $0.89 and revenue rose 3 percent to $10.95 billion, both being strong beats.

Oracle’s Q4 cloud sales were also up 58 percent to $1.4 billion. The segment serves as the base for Bonner’s bull thesis.

Cloud Coverage

“Oracle’s primary execution task is now to accelerate the conversion of its blue chip customer base to the cloud,” said Bonner in a note.

Fiscal 2018 could be tipping point for cloud revenue growth outpacing on-premise software licenses. Oracle’s extensive package of cloud services, already showing margin expansion, will allow it to compete with the sector’s heavy hitters, including Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and salesforce.com, inc. (NYSE: CRM).

Management called out Amazon.com, Inc. (NASDAQ: AMZN)’s Web Services in its earnings report, saying Oracle’s Infrastructure-as-a-Service segment beats it in cost and speed.

Management also expects Oracle’s acquisition of NetSuite last fall to be accretive to its cloud business by boosting its presence in the small and medium enterprise markets.

Bonner agrees, but doubts the company will maintain both services, which he called a duplicative effort, in the long-term, instead choosing one technology set or integrating them.

Bonner forecasts fiscal 2018 EPS at $2.97 and 8.5 percent revenue growth.

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Latest Ratings for ORCL

DateFirmActionFromTo
Oct 2018NomuraMaintainsBuyBuy
Oct 2018NeedhamInitiates Coverage OnHold
Oct 2018Evercore ISI GroupDowngradesBuyIn-Line

View More Analyst Ratings for ORCL
View the Latest Analyst Ratings

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