ORCL Q1 2016 Earnings

This past Wednesday September 16^th Oracle Corp. released Q1 2016 earnings report. Earnings per share (EPS) beat the street’s expectations by a cent and revenue missed expectations. Total revenue was down about 1.7% YoY as the company continues to transition much of their product offerings into the cloud-space. New software licenses were down about 16% YoY as expected with the product transitions. Cloud SaaS increased 33% YoY beating growth expectations; additionally cloud infrastructure was up about 16% YoY. All of the other revenue line items were relatively flat YoY. ORCL continue to be plagued with the issue of currency headwinds associated with the strong USD, on a constant currency basis ORCL’s revenue was up 7% YoY. Additionally the fact that EPS beat expectations and that total revenues missed expectations indicates that ORCL is succeeding in consolidating operating expenses as they transition their major product offerings. Growth prospects for ORCL remain strong in the Cloud SaaS and PaaS industries, as they appear to be making the transition into cloud services with more success than many of their competitors like SAP, and IBM. The earnings report was released on Wednesday after the market close, immediately following the mixed earnings release ORCL was trading up. The following day (same day as FED announcement on interest rates) ORCL traded down about 3% and continued to close the week on Friday at $36.38. The ORCL model has been updated and consists of a new price target of $53.48 representing a 47% upside off of the current price and a 27% upside off of our purchase price of $42.25

Jeff Sherman