Oracle Corporation ORCL didn’t deliver the type of blowout numbers shareholders were hoping for in the most recent quarter, but the company did give investors plenty of reasons for optimism. According to Barclays analyst Raimo Lenschow, Oracle’s cloud services segment was a particularly bright spot.
Despite disappointing numbers on maintenance, hardware and operating margins, Lenschow believes the biggest takeaway from Oracle’s report is the bullish fiscal 2017 cloud guidance.
“The stock might be under pressure in the near term due to the maintenance and margin miss, but we think the cloud transition story is coming together nicely,” Lenschow explained.
Oracle delivered yet another quarter of strong cloud growth and guided for 67 percent year-over-year (Y/Y) revenue growth in fiscal 2017.
“In F717, we expect the growth in cloud revenue will more than offset the on-premise license revenue decline, and combined with improving cloud gross margins and operating margin, operating profit will start to grow again,” Lenschow added.
Barclays projects cloud services will represent 10 percent of Oracle’s total fiscal 2017 revenue. In the meantime, Lenschow feels that Oracle’s stock is underpriced because investors still don’t believe in Oracle’s transition to the cloud.
Barclays slightly reduced its next two quarterly EPS estimates for Oracle to $2.67 and $2.92, respectively. However, the firm maintains an Overweight rating and $48 price target for the stock.
At time of publication, Oracle was seen trading at $38.95, down 4.67 percent on Friday.
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