Market Overview

Stifel Projects A Prolonged 'State Of Transition' For Oracle In Downgrade Report

Stifel Projects A Prolonged 'State Of Transition' For Oracle In Downgrade Report
Related ORCL
Q3 13F Roundup: How Buffett, Einhorn, Ackman And Others Adjusted Their Portfolio
Tesla Criminal Probe Reportedly Intensifies As FBI Reviews Model 3 Production Numbers
Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q3 2018 Update (Seeking Alpha)

Oracle Corporation (NYSE: ORCL) reported mixed fiscal third-quarter results Monday that led Stifel to drop its bullish stance on the stock. 

The Analyst

Stifel's Brad Reback downgraded Oracle from Buy to Hold with a newly assigned $53 price target.

The Thesis

Oracle's top-and-bottom line came in ahead of the Street's expectations, but the EPS beat was mostly driven by a lower-than-expected tax rate of 16 percent, Reback said in the downgrade note.

SaaS revenue of $1.16 billion did rise 21 percent year-over-year, but fell short of the $1.19 billion the analyst expected. In fact, the miss in the SaaS business came at a time when several of Oracle's properties like Fusion ERP and HCM saw high levels of growth, Reback said. 

Oracle said for the first time that its "legacy" acquired SaaS properties are only growing at a low single-digit rate, which is weighing on overall SaaS growth rates, the analyst said. This could imply that Oracle is seeing a mix shift within the SaaS business similar to the mix shift within the PaaS/IaaS business that was seen in the prior quarter, he said. 

Oracle's license revenue "modestly disappointed," Reback said, as revenue fell 6 percent year-over-year and maintenance revenue grew only 1 percent from a year ago.

Oracle's "lackluster" earnings report and outlook is concerning, and the company will likely remain in a "state of transition in coming years," according to Stifel. 

Price Action

Shares of Oracle were trading lower by more than 8 percent early Tuesday morning.

Related Links:

Morgan Stanley: Oracle Is A Buy Ahead Of The Q3 Print

KeyBanc Says SaaS Investors Should Remain Bullish, But Selective

Oracle Executive Chairman Larry Ellison. Courtesy photo. 

Latest Ratings for ORCL

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

View More Analyst Ratings for ORCL
View the Latest Analyst Ratings

Posted-In: Brad Reback IaaS Paas SAASAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (ORCL)

View Comments and Join the Discussion!

Latest Ratings

CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

NutriSystem Hit With Downgrade On 'Weaker Near-Term Growth Prospects'

The Market In 5 Minutes: Oracle, Uber, Facebook, Aramco And Toys 'R' Us