Deutsche Bank Raises Oracle rice Target

Deutsche Bank raised its price target on Oracle Corporation ORCL from $42 to $44 due to the recovery in database software license growth after the company beat Q2 financial expectations. The firm maintained a Hold rating.

Analyst Karl Keirstead commented that “three revenue segments stood out, including 1) a recovery in NA database growth to 10 percent+, 2) an acceleration in new cloud bookings to 140 percent from 54 percent and 3) a pickup in c/c maintenance revenue growth to 9 percent in from 6-7 percent in prior quarters.”

Keirstead liked that “ORCL (with 7 percent c/c growth in 2QF15 and solid c/c guidance for 6 percent for 3QF15), is materially out-growing most other “legacy” technology firms and non-GAAP operating margins are holding flat.”

Things the analyst “liked less” included “total c/c software license growth [at] zero (similar to prior quarters) and over the last two quarters, both non-GAAP EPS growth and FCF growth have been just 3-4 percent. The cloud metrics are improving, but SaaS/PaaS revenue growth of 41 percent was in-line with (not above) guidance of 40-45 percent and the 3QF15 SaaS/PaaS growth guidance of 30-34 percent doesn’t reflect the strong recent bookings numbers (it could take time).”

“We feel better, but at ~13x FY15 non- GAAP EPS (seems fair for a company growing in the mid single digit range), the organic growth profile is not enough to move us to a more constructive call on the stock just yet,” Keirstead concluded.

Oracle traded at $43.44 in the premarket, up 5.54 percent.