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News For WDAY From the Last 2 Days
Mar 20, 2018 | 10:33 EDT
Shares of Oracle (ORCL) are sliding after the company reported better than expect third quarter results, but disappointed some Wall Street analysts with its guidance for cloud-computing revenue. Both Stifel and Bank of America Merrill Lynch downgraded the stock to Neutral-equivalent ratings in the wake of the quarterly report. However, not all were as bearish, as MUFG analyst Stephen Bersey was among those on the Street saying shares should be bought on the post-earnings selloff. RESULTS: Last night, Oracle reported third quarter adjusted earnings per share of 83c and revenue of $9.8B, both above consensus of 72c and $9.78B, respectively. The company also said Cloud Software as a Service revenues were up 33% to $1.2B in the quarter, while Cloud Platform as a Service plus Infrastructure as a Service revenues were up 28% to $415M. Total Cloud Revenues were up 32% to $1.6B. Additionally, Oracle reported third quarter adjusted operating margin of 44%, and announced that short-term deferred revenues were up 8% to $8B. For the fourth quarter, the company sees adjusted EPS of 92c-95c in USD, revenue growth between 1%-3%, and cloud revenue growth of 19%-23%, or 17%-21% in constant currency. MOVING TO THE SIDELINES: In a research note to investors, Stifel analyst Brad Reback downgraded Oracle to Hold from Buy, with a $53 price target, citing quarterly results. The analyst noted that he finds the "lackluster results/guidance concerning," especially in contrast to the strong results posted by Microsoft (MSFT), Salesforce (CRM), Adobe (ADBE), Workday (WDAY), ServiceNow (NOW), Splunk (SPLK), and Nutanix (NTNX). Overall, Reback argued that while Oracle has a strong cash engine from its installed maintenance base, the PaaS/IaaS business will remain in a "state of transition" in coming years, and the 18c Autonomous Database will likely not drive an upgrade cycle until at least 2020, and more likely 2021-2022. Meanwhile, his peer at Bank of America Merrill Lynch also downgraded Oracle to Neutral from Buy on the weaker than he expected quarterly results. Analyst Kash Rangan points out that while both partner and customer sentiment is improving, it will take longer for progress to impact the numbers than he had expected. Nonetheless, the analyst acknowledged that the long-term set up is positive. Rangan also lowered his price target on Oracle shares to $57 from $62. SELLOFF A BUYING OPPORTUNITY: Still bullish on the stock, MUFG analyst Stephen Bersey argued that Oracle had "solid" third quarter results and noted that he was "pleased to learn" that the business-software maker believes it is still taking market share in the cloud. The company's growth story is intact, but could have been better communicated on the earnings call, Bersey contended. The analyst recommended using the selloff as a buying opportunity, reiterating an Overweight rating and $58 price target on the shares. Meanwhile, his peer at Piper Jaffray argued that while Oracle's fourth quarter guidance for both revenue and cloud revenue was slightly below consensus, he remains confident that its Software as a Service revenues are set to accelerate in fiscal 2019. Analyst Alex Zukin noted that with shares trading 19% below the peer group, the valuation is attractive. The analyst lowered his price target on Oracle's shares to $55 from $57 but reiterated an Overweight rating on the stock. PRICE ACTION: In morning trading, shares of Oracle have dropped almost 9% to $47.41.
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