Oracle Corporation ORCL reported robust 4QFY16 results, while raising the cloud revenue guidance for 1QFY17.
Barclays’ Raimo Lenschow reiterated an Overweight rating on the company, with a price target of $48.
Beat And Raise
Lenschow mentioned that the main highlight for 4QFY16 was the higher than expected cloud revenue, which beat the consensus, while most of the other metrics were mostly in line with expectations.
“Given the nervousness of investors going into results, we believe that these numbers were good enough, and therefore expect renewed interest in the name,” the analyst said.
Following another quarter of accelerating cloud revenue growth, Oracle raised its cloud guidance for 1QFY17.
The FY17 cloud revenue growth is expected to be above 65 percent, although with some contribution from the recent Texture and Opower acquisitions.
“In FY17, we believe the growth in cloud revenue will more than offset the on-premise license revenue decline, and combined with improving cloud gross margins, operating margins and operating profit should start to grow again,” Lenschow pointed out.
The analyst believes cloud is likely represent almost 10 percent of the total revenue in FY17, which is likely to spark investor interest once more in the stock.
Lenschow also noted Oracle’s cash flows and capital returns were “quite compelling,” while stating the profits were expected to start growing again.
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