Canaccord Genuity analyst Richard Davis has high hopes for Oracle Corporation (NYSE:ORCL), reiterating a Buy recommendation on the stock with a 12-month price target of $50.00, which represents a potential upside of 24% from where the stock is currently trading. Davis believes that now is a good opportunity to buy ORCL after the shares have sold off more than 10% since the firm reported earnings two weeks ago.
In his research, Davis wrote, “The disappointment was largely driven by currency-muted revenue growth and a material earnings shortfall as customers opted for cloud purchases (with deferred revenue recognition) instead of paid-up licenses in the quarter. The bottom line is that the firm’s transition to the cloud is happening faster than expected, which when viewed objectively is actually a good thing. We cannot stress enough that the economics of a cloud subscription, versus a license + maintenance deal, are more attractive by a factor of 2-3x over the long term.”
The analyst continued, “We view the near-term disruption in ORCL shares, which are now trading at 12x our F2017 FCF/share estimate, as a good buying opportunity. The purpose of this note is more estimate update than anything else, but we likewise want to reiterate that our thesis on Oracle is unchanged: we continue to expect that ORCL shares will realize a several-point multiple expansion on its FCF-based valuation as investors gradually gain confidence in the firm’s transition to the cloud.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Richard Davis has a total average return of 6.5% and a 55.1% success rate. Davis has a 3.3% average return when recommending ORCL, and is ranked #436 out of 3688 analysts.