Oracle Corporation (ORCL) Boasts Big Opportunity to Gain Share in Enterprise Software Market, Says Analyst Brian White

Even as Drexel Hamilton's Brian White lowers his SaaS growth expectations for next two fiscal years, the analyst is enticed by market share prospects ahead.


Oracle Corporation (NYSE:ORCL) may face challenging comps ahead from the eyes of bullish Drexel Hamilton analyst Brian White, who believes that if his predictions are right for cloud maker rival Salesforce to yield a stellar quarterly showcase tonight, growth expectations for software as a service (SaaS) will likewise look “reasonable” for fiscal 2018 and fiscal 2019.

Nonetheless, the software giant has “more cloud to look forward to,” cheers the analyst, commending the company’s innovative turns that elevate its portfolio and strengthen its standing in the enterprise software playing field.

Ahead of this evening’s quarterly print expected from Salesforce, the analyst reiterates a Buy rating on ORCL stock with a $62 price target, which implies a 26% increase from current levels. (To watch White’s track record, click here)

White highlights, “We believe the new innovations announced by Oracle in early October at Oracle OpenWorld can take the company’s cloud portfolio to a whole new level and the Autonomous Database for Data Warehouses is expected in December.”

Keep in mind, “Over the past three years, Oracle has built a formidable SaaS offering with SaaS sales reaching $1.09 billion in 1Q:FY18 and growing 62% YoY (up 61% in CC). Even high-quality SaaS players such as Salesforce, SAP and Workday do not enjoy the breadth and depth of Oracle’s SaaS portfolio. As such, we believe Oracle has a big opportunity to gain share in the enterprise software market in the coming years with its SaaS offering, combined with a strong PaaS and IaaS portfolio,” the analyst notes.

However, with a one-year anniversary of the NetSuite takeover under wing, the annual gains from the software giant’s SaaS sales are up against “difficult comparisons” down the line, leaving the analyst lowering his revenue growth rate forecasts. For fiscal 2018, the analyst dials back his expectations from 51% to 39% and for fiscal 2019, White lessens his growth rate from 40% to 26%.

Additionally, the analyst tweaks his total revenue projection from $39.6 billion to $39.3 billion for fiscal 2018 and adjusts his EPS estimate from $2.97 to $2.94. For fiscal 2019, the analyst reduces his revenue estimate from $40.7 billion to $39.7 billion and lowers his EPS forecast from $3.19 to $3.12.

Leveraging machine learning, the analyst set loose its the Oracle 18c Autonomous Database and Highly Automated Cyber Security at the start of last month with a “more jacked up” sales force than the company has had in many years. “Moreover, Oracle expects to gain database market share and this new innovation will drive increased option purchases,” White surmises, maintaining his bullish case for the tech player.

Wall Street goes to the bulls when it comes to this software giant, as TipRanks analytics exhibit ORCL as a Strong Buy. Based on 20 analysts polled by TipRanks in the last 3 months, 17 rate a Buy on Oracle stock while 3 maintain a Hold. The 12-month average price target stands at $48.81, marking a nearly 20% upside from where the stock is currently trading.

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