Oracle Likely To Gain Traction In Medium Term Backed By Cloud Momentum, Improving Margins, Analyst Says Post 3Q Results

Mizuho analyst Siti Panigrahi reiterates Buy on Oracle Corp ORCL with a $116.00 price target.
Oracle's 3Q was driven by substantial cloud revenue ahead of consensus. While on-prem revenue came in slightly below consensus estimates, the company beat on cloud growth, operating margins, and EPS.
Management was particularly bullish on its OCI differentiation and Cerner.
Management guided to an impressive Q4 guide of 30%+ cloud growth.
The analyst increased the FY23 cloud revenue estimates and slightly lowered the license on-prem license.
Panigrahi raised the operating margin estimate as the company progressed on its cost-cutting initiatives.
The analyst increased EPS estimates, which benefit from margin improvements and a forecasted decline in the Q4 tax rate.
Despite the uncertain macro backdrop where competitors have noted headwinds, Oracle continues to see strong momentum across its SaaS and OCI business.
The analyst reminds investors that ORCL remains uniquely differentiated in application and infrastructure markets.
As the only true vertically integrated infrastructure and application provider with a best-in-class ERP/HCM offering and a rapidly improving infrastructure (OCI Gen 2) offering that is price competitive, the analyst expects that Oracle will continue to gain traction over the medium term.
Both cloud growth and significant margin improvements over the medium-term back the re-rating.
Price Action: ORCL shares traded higher by 1.01% at $84.94 on the last check Monday.

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