William Blair Maintains Market Perform On Oracle Following Analyst Day


In a research report issued yesterday, William Blair analyst Jason Ader maintained a Market Perform rating on Oracle (NYSE:ORCL), following the company’s financial analyst event, which took place in San Francisco last week.

Ader wrote, “We came away convinced that Oracle is finally running full throttle into the cloud—which is a major cultural shift for the company, one many years in the making. While this presents some transition risk for the next few years, specifically potential revenue growth and margin headwinds due to the shift to a subscription business model, we believe this is a necessary and highly strategic move for Oracle and should be positive in the long run if the company is able to execute. Providing air cover for this shift to the cloud is a huge base of on-premise software maintenance revenue that continues to grow (up 6% yearover- year last quarter) despite declining on-premise license revenue, and a large, sustainable franchise in relational databases (with its database-as-a-service offering a transition path to the cloud).”

The analyst continued, “Overall, it is hard not to be impressed with the sheer breadth and depth of Oracle’s offerings on display at Open World, the stickiness of its solutions (with Oracle’s database as the foundation), and its massive installed base of customers. At the same time, we struggle with the degree of business model transition, and meaningful upside to the stock in the near to medium term may depend on how rapidly Oracle moves its customers to the cloud (and gets to significant scale in cloud revenue to offset the higher costs of delivery) and how effectively the company can fend off cloud-centric, best-of-breed competitors trying to poach customers often weary of dealing with an historically heavyhanded Oracle. If we get a clear sense that the company is accelerating its crossing of the cloud “chasm,” we could get more constructive on the stock.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jason Ader has a total average return of 5.3% and a 48.8% success rate. Ader is ranked #928 out of 3319 analysts.

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