Oracle (ORCL) PT Raised to $145 at Evercore ISI, 'Outlook Less Cloudy'
Evercore ISI analyst Kirk Materne raised the price target on Oracle (NYSE: ORCL) to $145.00 (from $130.00) while maintaining a Outperform rating.
The analyst comments "Bottom line: Oracle shares are up nicely in the after-market as OCI revenue growth of 52% in c/c was in line with our expectations and importantly, F4Q guidance infers OCI growth of ~40% against a very difficult compare. The other highlight was the strength in RPO, which grew 41% in c/c excl. Cerner to $80bn and cRPO growth of ~15%. Notably, OCI revenue grew $175mn sequentially vs. $100mn last quarter. We believe Oracle continues to benefit from some large customer wins around OCI and we expect that the company’s pipeline of sovereign deals could add another element of growth when looking ahead to FY25. It is also worth noting that most of the strength in RPO is due to ‘normal’ cloud workloads with most of the benefit from AI and OCI @ Azure being more additive in FY25. Finally, Strategic SaaS revenue grew 18% in aggregate, with Fusion ERP up 20%. While capex was a bit lighter than we expected, the outlook for F4Q and FY25 (~$10bn) points to the continued data center build out to support OCI. Overall, the bookings acceleration helps support an upbeat outlook for OCI into FY24 and we continue to believe that overall growth in the high single digits in FY25 seems reasonable. While we expect revenue recognition will remain lumpy in the near-term as data center capacity (think power, not GPU’s) remains scarce, we remain constructive on the set up into FY25 as OCI momentum should continue, SaaS remains steady in high teens/20%, and Cerner comps get materially easier. We are bumping our PT to $145 based on 21x CY25 EPS. In terms of the key takeaways from the quarter, we would highlight the following: 1) F4Q revenue guidance of +4-6% was slightly below Street expectations of +6.3%, but management expects growth of 6- 8% excluding Cerner and believes Cerner will deliver growth in FY25; 2) RPO climbed to $80bn+, up 41% excluding Cerner, and management flagged there is a growing trend of customers wanting larger contracts; 3) Management expects CapEx to land at $7-7.5bn in FY24 as ORCL continues to bring on capacity, implying a step-up in 4Q CapEx; and 4) Database subscription revenues were up 5%, highlighted by cloud database services annualized revenue of $1.9bn and 34% growth. Oracle remains upbeat about databases becoming the third leg of the cloud growth story."