Today, after market close, Oracle Corporation (ORCL)
released their Q4 2015 earnings. Oracle’s earnings were severely weakened by
the strong US dollar and related foreign currency headwinds. The currency
headwinds alone turned what would otherwise have been solid single digit growth
in ORCL’s core competencies into single digit decreases. For example, total
revenue fell 5 percent, but without the currency the change would have been a
positive 3 percent. Perhaps most importantly, Oracle’s primary cloud component
saw an increase of 29% while the pro forma growth (excluding currency headwinds)
saw an increase of 35%. The market’s reaction was overwhelmingly negative with
ORCL showing a decrease of over 6% in after-hours trading Wednesday. This
decrease brings ORCL down to $42.10 (7:10 P.M.) slightly below our purchase
price of $42.25. A factor that contributes to this earnings miss is analysts
over-estimates of fourth quarter growth as salespeople rush to meet quotas in
the end of ORCL’s fiscal year 2015. The financial model for ORCL has been updated and the new price target is $52.86.
Jeff Sherman
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