This past Wednesday September 16th 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
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