Oracle Shares Fall, Analysts Tepid After Shaky Q1 Print

Shares of Oracle Corporation ORCL dropped on Thursday after a lackluster first-quarter print that also kept sell-side analysts tepid on the stock.

Quarterly sales came in at $9.21 billion, missing estimates by $72 million and guidance for the current quarter was below estimates. The company did announce its cloud Enterprise Resources Planning, or ERP, business, grew 33%.

The company also announced CEO Mark Hurd will take a medical leave of absence.

The Analysts

Morgan Stanley’s Keith Weiss remains Equal-Weight on Oracle with a $59 price target.

UBS analyst Jennifer Swanson Lowe remains Neutral with a $57 price target on the stock.

BMO’s Keith Bachman kept a Market Perform rating on the stock while raising the target price from $59 to $60.

The Theses

Weiss noted that the “shaky” print was blamed on a license miss, with management citing a sales reorganization. But several other factors kept him cautious, he said, citing mixed performance in Oracle’s apps portfolio another quarter of year-over-year deferred revenue declines, and the step-back in full-year revenue growth targets.

“The lack of revenue or operating income growth likely keeps the multiple rangebound,” Weiss said of the stock’s prospects.

Swanson Lowe acknowledged the sales reorganization’s contribution to the slow start to the fiscal year, but said the stock isn’t likely to rise above the problem.

“The combination of persistent low-single digit growth and soft cash flow is likely to keep ORCL's valuation at current levels,” Swanson Lowe wrote in a note.

She did, however, add that she sees little risk from Hurd’s medical absence noting a co-CEO structure with Safra Catz, and the ongoing involvement of founder Larry Ellison.

Missed Opportunities

Bachman thinks Oracle has shown disappointing execution when confronted with large opportunities in past years, and fears more of the same, adding skepticism on the impact of reported growth in its ERP and autonomous data base businesses. Adoption time periods for those markets are both “very long,” Bachman posed.

“Also, Oracle needs to try to balance new growth opportunities with the risk of further erosion in existing, legacy markets,” he said.