Oracle Earnings Beat Wall Street Estimates; Buy with Target Price $64

Oracle, an American multinational computer technology corporation, reported better-than-expected earnings in the second quarter of the fiscal year 2021, largely driven by a surge in sales of software licensing and cloud product due to extended work from home in response to the COVID-19 pandemic.

One of the largest vendors in the enterprise IT market said its net income increased to $2.44 billion, or 80 cents per share, in the quarter ended November 30, up from $2.31 billion, or 69 cents per share, seen in the same period last year.

Excluding items, the company reported EPS of $1.06 per share, beating Wall Street estimate of $1 per share. In addition, total revenues increased 2% to $9.8 billion, beating market expectations of $9.79 billion.

“Oracle reported second-quarter fiscal 2021 results beating CapIQ consensus estimates for revenue and adjusted earnings per share. Notably, on the earnings call, however, was Chairman Larry Ellison’s comments on how Oracle’s supply fell short of demand as a result of Oracle’s lack of capacity in Oracle Cloud Infrastructure, or OCI, which is Oracle’s infrastructure as services, or IaaS, offering,” said Julie Bhusal Sharma, equity analyst at Morningstar.

“While demand for Oracle’s IaaS is encouraging, Oracle’s inability to forecast such demand is not, and we expect overall demand for OCI to still fall short of what demand is for more robust IaaS competitors like AWS and Azure. Considering the quarter’s results and third-quarter outlook roughly in line with our former expectations, we are maintaining our fair value estimate of $53 per share for Oracle. With shares hardly moving around its $60 per share market price after hours, we would recommend waiting for a pullback before committing capital to the wide-moat name,” Sharma added.

Oracle’s shares closed 0.42% lower at $59.48 on Thursday. However, the stock is up over 12% so far this year.

Oracle Stock Price Forecast

Fourteen equity analysts forecast the average price in 12 months at $64.75 with a high forecast of $71.00 and a low forecast of $57.00. The average price target represents an 8.86% increase from the last price of $59.48. From those 14 analysts, four rated “Buy”, ten rated “Hold” and none “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $67 with a high of $84 under a bull-case scenario and $45 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the multinational computer technology corporation’s stock.

“Our new price target of $67 is based on a 14x multiple applied to our CY22 EPS estimate of $4.83. Our old price target of $62 was based on 14x multiple applied to our prior $4.51 CY21 EPS estimate,” said Keith Weiss, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Barclays raised the stock price forecast to $66 from $62; RBC upped the target price to $71 from $68; Piper Sandler increased the price objective to $57 from $50; JP Morgan raised the price target to $68 from $61; Credit Suisse upped the target price to $67 from $66.

Analyst Comments

“Oracle’s current low valuation at 13x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” Morgan Stanley’s Weiss.

“We see 15% EPS growth in FY21 and 6% in FY22, driven by an aggressive pace of share buybacks. However, cc revenue growth is 2%, in a software sector filled with strong secular growth stories, and just 2% operating income growth points to Oracle potentially reaching peak margins, leaving us Equal weight at our $67 price target.”

Upside and Downside Risks

Risks to Upside: 1) Stronger adoption of Autonomous Database offering drives positive YoY growth in License revenues. 2) Accelerated adoption of Fusion Apps – highlighted by Morgan Stanley.

Risks to Downside: 1) Disruptive technologies in the data management market. 2) Rapid migration towards SaaS-based subscription application model hurts near-term optics due to ratable revenue recognition. 3) Strong competition from other secular Cloud application vendors.

Check out FX Empire’s earnings calendar

Anticipation Builds Ahead Of Microsoft Earnings

Dow component Microsoft Corp. (MSFT) reports fiscal Q1 2021 earnings on Oct. 27, with analysts expecting a profit of $1.36 per-share on $35.8 billion in revenue. The stock sold off more than 6% after the Q4 release in July, despite beating top and bottom line estimates. Market watchers blamed the sell-the-news reaction on overly-high expectations for the cloud and commercial products divisions. The stock recovered those losses into August and posted an all-time high in early September.

Microsoft And TikTok

Buying pressure resumed after Mr. Softee threw its hat into the ring in the TikTok drama, seeking to acquire the company while jumping through political hoops in China and the United States. Oracle Inc. (ORCL) eventually won the coveted prize but continued conflict between nations suggests that Microsoft was lucky to walk away empty-handed and redirect attention to core services and the Nov. 10 release of the next-generation Xbox console.

Morgan Stanley analyst Keith Weiss discussed the revenue boost expected from the Xbox release earlier this month, stating, “The fiscal year 2021 console cycle and the addition of Bethesda highlight incremental growth opportunities for Microsoft’s gaming franchise, w/ a potential ~$80 billion value for the gaming subscription biz alone. Our bottom up work suggests the console cycle should not derail a broader margin expansion story. Overweight.”

Wall Street And Technical Outlook

Wall Street has been bullish on the big tech powerhouse for years, with a current ‘Moderate Buy’ consensus based upon 23 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines at this time. Price targets currently range from a low of $208 to a Street-high $260 while the stock is set to open Monday’s U.S. session about $16 below the median target. There’s plenty of potential upside after a strong strong quarterly report, given this humble placement.

Microsoft broke out above the first quarter high at 190.65 in June and added more than 40 points into the September peak. It then sold off with broad benchmarks, testing the 50-day moving average for more than 5 weeks before surging off a small base earlier this month. Accumulation readings are hovering near new highs, supporting continued upside, but monthly cycles are flashing overbought technical readings. This conflict suggests two-sided action through most or all of the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

ORACLE: The TikTok Battle

National security

Such is the case of TikTok. To young performers, it is known as an app where you share your creative ads dancing or doing anything else that may keep the attention of a multimillion audience for several minutes.

To the US security and intelligence, it is known as a Chinese data and social networking company that threatens to tap into the sovereign territory of the US social data. Roughly, that is the concern that made the administration of the US President impose the September-15 deadline for selling the US operations of TikTok to an American company.

Two contenders

Previously, Microsoft used to the main company in focus to continue TikTok’s US operations. However, the negotiations with this potential buyer went aside as Oracle took over the stage, and the people around the issue are pointing to the fact that the deal is very possible. But this is not the only thing people are pointing out: Oracle has been financially supporting Donald Trump’s campaigns and has been more than just cooperative with the US President until now.

So we have an international business, the US-China relations, and the US elections all in one knot around Oracle now. With all this in view, stocks of Oracle may soar in case the deal is successfully sealed: not because there are a lot of truly positive business outcomes from it, but because of the heightened degree of discussions around the matter.

Technical view

On the daily chart, the recent spike that still ended up below the previous high corresponds to the announcement that Oracle is likely to take over the race over TikTok from Microsoft. The bearish ending is logical for that bar because there is no deal signed yet, and in the end, what we have is just talks and negotiations. In the meantime, the deadline of September 15 is nearing – that means, even if we don’t see another bullish spike, there will be increased volatility in any case. In the end, it falls well into the equilateral upward channel Oracle’s stock has been in since March. Expect $56 to provide firm support while $62 may be the objective for bulls in the most aggressively bullish scenario. Otherwise, the area of $58-59 seems a fair target range for Oracle stock in the short term.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

Asia-Pacific Shares Higher Across the Board; Japan’s SoftBank Jumps More than 10%

The major Asia-Pacific stock indexes are trading higher on Monday, boosted by hopes of a coronavirus vaccine, acquisition news and politics. However, sentiment remained cautious ahead of a big week of central bank meetings in the U.K., Japan and the United States.

In the cash market on Monday, Japan’s Nikkei 225 Index is trading 23542.51, up 136.02 or +0.58%. South Korea’s KOSPI Index is at 2424.14, up 27.45 or +1.15% and Hong Kong’s Hang Seng Index is at 24667.61, up 164.30 or +0.67%.

In China, the Shanghai Index is trading 3267.13, up 6.78 or +0.21% and Australia’s S&P/ASX 200 Index is at 5879.30, up 19.90 or +0.34%.

Coronavirus Vaccine Hopes Rekindled as AstraZeneca Resumes Phase-3 Trial

AstraZeneca said on the weekend it has resumed British clinical trials of its COVID-19 vaccine, one of the most advanced in development, after getting the green light from safety watchdogs.

The late-stage trials of the experimental vaccine, developed with researchers from the University of Oxford, were suspended last week after an illness in a study subject in Britain, casting doubts on an early rollout.

A vaccine has long been awaited to help pull the world out of a coronavirus-induced lockdown. Friday marked six months since the World Health Organization (WHO) declared the coronavirus a pandemic on March 11.

Nvidia to Buy Chip Designer Arm for $40 Billion as SoftBank Exits

Nvidia will buy UK-based chip designer Arm from Japan’s SoftBank Group Corp for as much as $40 billion, the companies said on Monday, in a deal set to reshape the global semiconductor landscape.

Nvidia will pay SoftBank $21.5 billion in shares and $12 billion in cash, including $2 billion on signing. The deal will see SoftBank and its $100 billion Vision Fund, which has a 25% in Arm, take a stake in Nvidia of between 6.7% and 8.1%.

Shares of Japan’s SoftBank Group soared 10.26% in Monday afternoon trading.

Japan’s Suga Poised to Win Party Race, Headed for Premiership

Japanese Chief Cabinet Secretary Yoshihide Suga, a longtime loyal aide of outgoing Prime Minister Shinzo Abe, was poised to win a ruling party leadership election on Monday, virtually ensuring that he replaces Abe this week in the nation’s top job.

Suga, who has said he would pursue Abe’s key economic and foreign policies, is expected to get the bulk of votes from 394 Liberal Democratic Party (LDP) lawmakers and is likely to win a majority of 141 votes from the party’s local chapters.

Suga was on track to win over 70% of the MP’s votes and was leading among local chapters, public broadcaster NHK reported.

China Stocks Rise as STAR Market Shines on Regulatory Nod to Launch ETFs

Chinese shares rose on Monday, with Shanghai’s NASDAQ-style STAR Market leading gains after securities regulator approved the first batch of exchange-traded funds (ETFs), which are expected to draw fresh funds into the market.

Financial sector climbed up marginally after China issued new rules on Sunday to regulate financial holding companies, in its latest move to prevent systematic risks to the nation’s vast financial sector.

In other news, sources told Reuters that ByteDance abandoned the sale of TikTok in the United States on Sunday in pursuit of a partnership with Oracle Corp that it hopes will spare it a U.S. ban while appeasing China’s government.

For a look at all of today’s economic events, check out our economic calendar.

TikTok to Pursue Partnership with Oracle; Microsoft Proposal Rejected

ByteDance abandoned the sale of TikTok in the United States on Sunday in pursuit of a partnership with Oracle Corp that it hopes will spare it a U.S. ban while appeasing China’s government, people familiar with the matter told Reuters. The decision between TikTok and Oracle to become business partners in the United States is expected to satisfy the Trump administration’s national security concerns.

The White House had imposed a September 20 deadline for ByteDance to announce a plan for a sale of TikTok in the U.S. or be banned by September 29, and a deal would have to be done by November 12.

Microsoft Bows Out of Deal to Buy TikTok

Meanwhile, Microsoft said Sunday that ByteDance had chosen not to sell it TikTok’s U.S. assets.

The exact nature of the agreement between TikTok and Oracle remains unclear, but it was not described as an outright sale. The news about Oracle came just after Microsoft announced that it will not buy TikTok’s U.S. operations from ByteDance.

“We are confident out proposal would have been good for TikTok’s users, while protecting national security interests,” Microsoft said in a blog post Sunday. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement.”

Multiple analysts had described Microsoft’s pursuit of TikTok as a potential “coup” for the Washington state-based firm – an opportunity to scoop up one of the world’s fastest growing social media platforms at a time when TikTok may be desperate to make a deal.

According to CNBC, “Microsoft’s failure to buy TikTok amounts to a symbolic loss for Satya Nadella, who took over Microsoft from Steve Ballmer in 2014. Under Ballmer, Microsoft had sought to buy Yahoo in 2008 but ultimately withdrew the bid after Yahoo rejected the offer, even as Microsoft increased the amount it was willing to pay.”

Walmart May Still Has an Interest in TikTok

A deal could have also included an American retail giant:  Walmart was also participating in negotiations with Microsoft over a potential deal. The retailer had said it was interested in how TikTok could have bolstered its access to consumers.

Walmart on Sunday told CNN Business that it “continues to have an interest in a TikTok investment and continues discussions with ByteDance leadership and other interested parties.”

“We know that any approved deal must satisfy all regulatory and national security concerns,” the company said in a statement.

ByteDance has not responded to a request for comment. TikTok declined to comment and Oracle did not respond to a request for comment.

For a look at all of today’s economic events, check out our economic calendar.

Oracle Q2 Revenue Jumps on Growing Demand for Cloud Services, License Support; Target Price $65

Oracle Corporation, an American multinational computer technology company, reported a 2% increase in total revenues in the second quarter, largely driven by demand for cloud services and license support, which accounted for 74% of the company’s total revenue, amid COIVD-19 pandemic, sending its shares up about 5% in pre-market trading on Friday.

The database giant said its revenue from its largest unit, that includes its cloud services, rose 2.1% to $6.95 billion. Total revenue rose 1.6% to $9.37 billion. The company’s net income rose to $2.25 billion, or 72 cents per share, in the first quarter ended August 31, from $2.14 billion, or 63 cents per share, a year earlier.

“With management citing very strong Database bookings/backlog following a major release in 4Q, the prospect of a new product cycle is back, which would fuel a major new growth engine. Maintain Outperform. Raise price target to $70,” said J. Derrick Wood, equity analyst at Cowen.

Zscaler’s shares jumped about 5% to $60.09 in pre-market trading on Friday; the stock is up over 8% so far this year.

Executive comments

“Q1 was fantastic with total revenue beating guidance by more than $150 million, and non-GAAP earnings per share beating guidance by $0.07,” said Oracle CEO, Safra Catz.

“Our cloud applications businesses continued their rapid revenue growth with Fusion ERP up 33% and NetSuite ERP up 23%. We now have 7,300 Fusion ERP customers and 23,000 NetSuite ERP customers in the Oracle Cloud. Our infrastructure businesses are also growing rapidly as revenue from Zoom more than doubled from Q4 last year to Q1 in this year. I have a high level of confidence that our revenue will accelerate as we move on past COVID-19.”

Oracle stock forecast

Twenty-one analysts forecast the average price in 12 months at $58.17 with a high forecast of $69.00 and a low forecast of $41.00. The average price target represents a 1.47% increase from the last price of $57.33. From those 21 equity analysts, six rated “Buy”, 14 rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $62 with a high of $77 under a bull-case scenario and $40 under the worst-case scenario. Stifel raised their stock price forecast to $56 from $48 and Wells Fargo upped their price target to $68.75 from $62.5.

Other equity analysts also recently updated their stock outlook. Barclays raised price target to $59 from $52, Cowen and Company increased their stock price forecast to $70 from $60, Evercore ISI raised target price to $65 from $55, Citigroup upped their price target to $61 from $54, Jefferies raised target price to $65 from $55, RBC increased their target price to $60 from $51 and Credit Suisse increased their price objective to $66 from $62.

We think it is good to buy at the current level and target $65 as 100-day Moving Average and 100-200-day MACD Oscillator signal a strong buying opportunity.

Analyst views

“Oracle’s current low valuation at ~13x CY21e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see 11% EPS growth in FY21 and 9% in FY22, driven by an aggressive pace of share buybacks. However, cc revenue growth is 2%, in a software sector filled with strong secular growth stories, and just 2% operating income growth points to Oracle potentially reaching peak margins, leaving us Equal-weight at our $62 price target,” Weiss added.

Upside and Downside Risks

Upside: 1) Stronger adoption of Autonomous Database offering drives positive YoY growth in License revenues. 2) Accelerated adoption of Fusion Apps – highlighted by Morgan Stanley.

Downside: 1) Disruptive technologies in the data management market. 2) Rapid migration towards SaaS-based subscription application model hurts near-term optics due to ratable revenue recognition. 3) Strong competition from other secular Cloud application vendors.

Check out FX Empire’s earnings calendar

Oracle Revenue Hit by Coronavirus Outbreak, Misses Fiscal Q4 Estimates

Oracle Corporation, an American multinational computer technology company, missed Wall Street’s revenue targets in the fourth-quarter as clients in retail industries and hospitality have either cancelled or postponed purchases in the wake of the coronavirus pandemic.

Database giant, Oracle, reported a net income of $3.11 billion for the last quarter of the fiscal year 2019-20, or 99 cents per share, down from $1.07 per share seen in the same period a year ago. Revenue dipped over 6% to $10.44 billion, missing the analysts’ prediction of $10.61 billion, down from $11.14 billion in the same quarter year ago.

Adjusted earnings were reported at $1.20 per share, again down from $1.16 per share seen a year ago. That is close to Oracle’s lower bound of March prediction of $1.20 to $1.28 per share on revenue of $10.92-$11.36 billion.

“Our overall business did remarkably well considering the pandemic, but our results would have been even better except for customers in the hardest-hit industries that we serve such as hospitality, retail, and transportation postponing some of their purchases,” chief executive officer, Safra Catz said in the statement.

Most of the customers in the business have postponed orders as the COVID-19 brought the global economy to a near-standstill affecting day-to-day business and demand. Some of the companies competing with Oracle have flagged the same ongoing problems, affecting its yearly outlook.

Oracle, which is making an aggressive push for its diversified software solutions and integrated cloud computing services, posted a quarterly sale of $6.85 billion, missing the forecast of $6.98 billion, including business from Oracle Cloud.
The company also reported a massive drop of 22% to $1.96 billion in revenue from on-premise license and cloud license, missing market consensus of $2.11 billion.

It is worth noting the company did not publish a numerical target for fiscal year 2020-21.

“We are now at a point where our growing businesses are now larger than our declining businesses and this favorable shift will inevitably drive revenue acceleration going forward,” said Chief Executive Safra Catz on a conference call with analysts Tuesday, reported by MarketWatch.

After the earnings release, Oracle shares slumped more than 4%, but later recovered all of its losses ad closed +2.5% at $54.59. The stock price has gained about 40% from the March’s low of $39.74 and recouped all of its coronavirus-induced losses, gaining over 3% so far this year.

According to Tipranks, 16 analysts forecast the average price in 12 months at $54.90 with a high of $60.00 and a low of $50.00. The average price target represents a 0.57% increase from the last price of $54.59.

It is good to buy at the current level as 20-day Moving Average and 100-day Moving Average signals a ‘buy’ opportunity; target $56 in the near-term with a stop loss of around $52.

Alphabet Inc (Google) Is Pursuing the Pentagon’s Giant Cloud Contract Quietly, Fearing An Employee Revolt

Google leaders used the two meetings and described the way in which company’s transition cloud computing as well as how it has been positioning itself as a powerhouse for research and development of artificial intelligence. In particular, the company’s founder was keen on showcasing how they were about AI every day and how they intend to implement cloud. This is according to one former and one current senior official from the Defense Department.

According to the officials, who spoke on condition of anonymity, this was not an overt sales pitch as such. However, the effect of the trip was transformative for the company. During the trip, Mattis also met a number of representatives from Amazon.com, Inc. (NASDAQ:AMZN). Mattis went west with a lot of reservations concerning the department’s shift to cloud and by the time he returned to Washington, he was fully convinced that the military needed to import a big portion of its data to a commercial provider of the cloud. The move would go beyond just managing emails, files or paperwork.

In September last year, officials from the Defense Department announced that the department would be moving into a cloud on a large scale. The Joint Enterprise Defense Infrastructure, or JEDI, the program has since been combined into a single contract and is worth $10 billion over a decade and will be awarded by the end of this year.

The competition for the contract is still in its early stages and the department is expected to announce the request for proposals any time this week. However, according to officials from the department, the race is shaping up into a three-horse race between Google, Microsoft Corporation (NASDAQ:MSFT) and Amazon. Oracle Corporation (NYSE:ORCL) comes in a distant fourth among the companies eying the deal. Although Microsoft and Amazon have been active participants in many events that are related to the deal, including an industry event which happened on March 7, Google has kept its interests in the deal away from the media and out the public gallery. The company’s management is even working hard to ensure that the details of their interest in the deal are kept away from its own employees.

The company has not responded to any comments regarding their interest in the JEDI deal. Google’s spokesperson in charge of cloud business recently said that they had secured the FedRAMP certification, which clears the company to compete for government contracts. Officials from Pentagon expect those who will lose the contract to protest so public conversation is being limited in a bid to reduce perceptions of favoritism. According to reports from several officials, Mattis is not concerned so much about who wins the contract. He has appointed Deputy Defense Secretary Patrick Shanahan to manage the entire process.  According to the officials, Mattis prefers the JEDI cloud to be secure and resilient and must be able to deliver any needed information fighters in combat. He also prefers a cloud that will not take long to build.