FBR Analyst Daniel Ives weighed in on Oracle Corporation (NYSE:ORCL) on August 5, maintaining an outperform rating on the stock with a price target of $44 in light of the company’s increasing cloud momentum. The analyst noted that Oracle has “been showing signs of a modest pickup in pipeline activity in the field, with feedback from customers, partners, and IT consultants indicating the cloud transition continues with the company’s broader set of offerings heading into FY16.”

Ives acknowledges “ongoing headwinds” for both Oracle’s cloud transition and its traditional license business, however the analysts “believe the company is on the right track” and emphasize the ongoing shift to the “cloud-centric platform”. In the near future, FBR recommends that Oracle centers on “cloud/ big data M&A” to refuel its growth engine. The FBR report considers other risks from the “intensely competitive market”, to “above-average volatility” in the technology sector to integration risks thanks to “Oracle’s aggressive acquisition strategy”.

Additionally, Ives released new estimates in the report, lowering his revenue and pro forma EPS estimates for F1Q from $8.7 billion and $0.58 to $8.5 billion and $0.52, respectively. Ives attributes the lower estimates to “the company’s ongoing transition to cloud revenue and foreign currency headwinds.” The analyst adds, “For FY16, we lower our revenue and pro forma EPS estimates from $38.9 billion and $2.87 to $38.6 billion and $2.70, respectively.”

Another key point of the report is an emphasis on “improving cloud momentum” amidst lacking growth prospects in the company’s traditional license business (the analyst estimates “a 9% year-over-year decline to $7.8 billion in FY16 on the heels of a 9% decline in FY15.”) FBR believes that Oracle’s cloud transition is still in early stages, and positions the Oracle 12c database as key to the success of this transition. Moreover, the Ives acknowledges that “more enterprises are strategically embarking down their cloud paths” which can only help Oracle as demand for cloud capabilities continues to grow. Ives adds, “we believe that the optimized systems strategy (Exadata and Exalogic), coupled with strong cloud initiatives, should allow Oracle to take market share from IBM, HP, and SAP. ”

In the “debatable points” section of the report, FBR considers various concerns investors may have. Firstly, the analyst dismisses hardware revenue declines as a concern due to the fact that Oracle’s “more strategic and profitable pieces of the hardware business, such as Exadata and Exalogic, are gaining momentum as the less strategic and unprofitable hardware pieces are phased out.” Ives also considers Oracle’s ability to deliver solid execution given its size; the analyst highlights the future benefits of both the cloud product and Exadata, as well as Oracle’s sales force expansion strategy. He also believes that “gross margins should improve over the coming years…as Oracle shifts its hardware sales away from low-margin servers and storage and toward high-margin engineered systems (Exadata and Exalogic), which contribute almost a third of hardware product revenue.” Finally, the analyst considers if Oracle is a legitimate contender in the cloud, articulating that its checks reveal Oracle Cloud possesses fast-growing infrastructure services.

Therefore, despite minor hiccups in Oracle’s road to success, FBR is bullish and maintains an Outperform rating on the Oracle stock.

Out of 17 analysts polled by TipRanks, 10 are bullish on Oracle and 7 are neutral. The average 12-month price target for Oracle is $47.07, marking a 19.44% potential upside from where the stock last closed. On average, the all-analyst consensus for Oracle is Moderate Buy.