Oracle (ORCL) Falls After Missing Revenue Estimates, Analyst Reactions Mixed

September 14, 2021 5:12 AM EDT
Get Alerts ORCL Hot Sheet
Price: $87.29 +0.05%

Rating Summary:
    25 Buy, 30 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 7 | Down: 14 | New: 24
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Shares of Oracle (NYSE: ORCL) are down almost 2% in pre-open after the company delivered mixed FQ1 results.

EPS came in at $1.03 to top the analyst estimates of $0.97 while revenue was reported at $9.73 billion to miss on the analyst consensus of $9.73 billion.

"Q1 results were excellent as constant currency revenue beat guidance by $100 million with all revenue segments exceeding forecast, and Non-GAAP earnings per share beating guidance by $0.08," said Oracle CEO, Safra Catz.

"Oracle's two new cloud businesses, IaaS and SaaS, are now over 25% of our total revenue with an annual run rate of $10 billion. Taken together, IaaS and SaaS are Oracle's fastest growing and highest margin new businesses. As these two cloud businesses continue to grow they will help expand our overall profit margins and push earnings per share higher."

Stifel analyst Brad Reback reiterated a Hold rating on ORCL and described FQ1 results as mixed. The analyst raised the price target from $65.00 per share to $77.00 per share.

“While management spoke to an increasing IaaS and SaaS business, we note that Cloud Services and License Support revenue missed the consensus estimate by ~$40M. We note that the EPS beat was driven by better than expected operating margins (despite the company's focus on accelerated opex investments) and a slightly lower than anticipated tax rate (18% vs 19%). Unsurprisingly, FCF decreased (21.5%) Y/Y, partially driven by the accelerating capex investments (~$1.1B during F1Q22 vs ~$440M in F1Q21) to support its Cloud growth,” the analyst commented in a note, before adding:

“While bulls may see these investments as a sign of growing Cloud demand from ORCL's installed base, we continue to believe the company is not winning meaningful levels of net new database business which will make it difficult for the top line to grow consistently above the low single digit rate,” Reback added.

Global Equities Research analyst Trip Chowdry is more bullish on ORCL than his colleague Reback. He reiterated a Buy rating and raised the price target to $125.00 per share as he urges investors to buy the dip.

“ORCL is trading at very low multiples, and has No Headwinds, Industry Leading Operating margins of 45% and 76% revenues are now recurring and growing,” Chowdry said.

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