Oracle Analyst Issues Downgrade As $10B In Quarterly Buybacks Come To A Close

Oracle Corporation ORCL was downgraded Tuesday by Macquarie, but the sell-side firm noted that it's not as bearish as the Street on the tech stock. 

The Analyst

Macquarie Research analyst Sarah Hindlian downgraded Oracle from Outperform to Neutral and lowered the price target from $56 to $55.

The Thesis

Oracle has significant value it can unlock — especially in cloud enterprise resource planning and autonomous database — but Hindlian said she sees risks to guidance and shares as the company's $10-billion per quarter in buybacks wind down in the next one to two quarters. (See her track record here.) 

Oracle was able to close the quarter and the year with some "pockets of success," but the period was overall a struggle, the analyst said. 

“Along with several leading partners seeing softening of the pipeline, we believe there is a step function lower in demand for Oracle and it is appropriate to re-evaluate." 

Hindlian said Oracle's valuation looks reasonable and she is stepping to the sideline as a result. 

“We could be buyers if Mr. Ellison were to make significant investments in Oracle, or fresh eyes took a look at the business," the analyst said. 

Macquarie said it is still not as bearish as the Street and sees several potential tailwinds for Oracle in 2020, including fewer marketing cloud revenue growth headwinds and cloud revenue doubling from three years ago. 

“We do not believe shares will dramatically underperform in the near term, especially should the current $10bn/quarter share repurchases continue unabated," Hindlian said. 

Price Action

Oracle shares were up 0.22% at $53.24 at the time of publication Tuesday. 

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Photo courtesy of Oracle.