Deutsche Bank Highlights The Good And The Bad Following Oracle Earnings

In a research report issued today, Deutsche Bank analyst Karl Keirstead reiterated a Hold rating on Oracle (NYSE:ORCL) and slightly raised his price target to $44 (from $42), which represents a slight upside potential from current levels.

On the good side, Keirstead noted, “To its credit, ORCL (with 7% c/c growth in 2QF15 and solid c/c guidance for 6% for 3QF15), is materially out-growing most other “legacy” technology firms and non-GAAP operating margins are holding flat. We attribute the nice recovery in NA database growth to a combination of some 12c license lift (this was NOT the whole story), better sales execution (ORCL recently swapped database sales leaders), an easier comp and perhaps some larger deals. This recovery helps to de-risk the story. We also like the improving cloud growth story, even if it still just 5% of the overall mix, and hardware growth of 4% also out-performed the guidance.”

On the bad side, the analyst wrote, “Total c/c software license growth was zero (similar to prior quarters) and over the last two quarters, both non-GAAP EPS growth and FCF growth have been just 3%-4%. The cloud metrics are improving, but SaaS/PaaS revenue growth of 41% was in-line with (not above) guidance of 40%-45% and the 3QF15 SaaS/PaaS growth guidance of 30%-34% doesn’t reflect the strong recent bookings numbers (it could take time). We also suspect that the MICROS acquisition could be creating a material lift to the maintenance, license and hardware growth rates and guidance. Lastly, we’re not seeing (and we don’t think that ORCL is seeing) any real lift in overall data infrastructure software spending.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Karl Keirstead has a total average return of 3.1% and a 48.1% success rate. Keirstead has a -1.6% average return when recommending ORCL, and is ranked #1311 out of 3417 analysts.

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