Oracle Faces Uncertain Macro Outlook In 2023, 3 Analysts' Takeaways On FQ2 Print

Oracle Corp ORCL shares traded higher on Tuesday, after the Austin, Texas-based company reported its fiscal second-quarter results.

• Piper Sandler analyst Brent Bracelin maintained a Neutral rating, while raising the price target from $75 to $85.
• JMP Securities analyst Patrick Walravens reaffirmed a Market Outperform rating.
• Guggenheim Securities analyst John DiFucci reiterated a Buy rating and price target of $115.

Check out other analyst stock ratings.

Piper Sandler

“November ending results were solid and better-than-feared relative to recessionary headwinds with a $316M top-line revenue beat,” Bracelin wrote in a note.

The revenue upside was driven by 27% organic Cloud growth, 16% growth in license revenue, and “an operating margin rebound to 41%,” he added. The price target had been raised to reflect “a slightly higher growth trajectory through FY27 and the assumption that the FCF margin has troughed and could begin to recover into next year,” he added.

JMP Securities

“On the positive side, Oracle's cloud business is ramping, achieving a run-rate of ~ $15.2B in F2Q and growing ~24% organically (27% in CC), the company had a nice win with the Department of Defense (DoD) for its Joint Warfighting Cloud Capability (JWCC) cloud services contract, and we like the ambitious vision for Cerner to modernize healthcare information systems and improve national healthcare systems,” Walravens said in a note.

“On the cautious side, Oracle faces an uncertain macroeconomic outlook next year, cloud growth may pressure gross margins over time, Cerner requires a major long-term integration effort, and the company has a significant debt burden, with a total of ~$90.9B in debt,” he added.

Guggenheim Securities

“It’s not that Oracle is immune to a slowing macro backdrop – no one is – but it does have offsetting factors that have mitigated those effects so far,” DiFucci stated.

“The primary factor has to do with something the investment community did not expect, though the company has talked about it for years: Oracle emerging as a legitimate Public Cloud vendor,” he added. “This has driven large OCI deals that in turn have likely been supportive of other important line items, including license, and frankly, the overall business momentum of the entire company, not just the Cloud business.”

ORCL Price Action: Shares of Oracle had risen by 2.74% to $83.51 at the time of writing Tuesday.

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