Oracle’s (ORCL) stock popped as much as 6% this morning after the software giant released fiscal first-quarter earnings in-line with Wall Street estimates. Specifically, the company posted FQ1 adjusted earnings of $0.80 a share, higher than the expected $0.78 per share. After a bumpy 2018, the good news put Oracle back in positive territory for 2018 – and nearly in-line with that of S&P 500 growth for 2018.
However, Oppenheimer’s top analyst Brian Schwartz remains sidelined on ORCL stock with a Market Perform rating. Why ‘top analyst?’ According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Schwartz has a yearly average return of 24.3% and a 72% success rate. Schwartz has a 13.8% average return when recommending Oracle, and is ranked #6 out of 5,100 analysts.
Schwartz calls Oracle’s results a “mixed bag,” as the company reports both positive and negative news. On the one hand, the analyst says its Applications segment had a “good quarter,” while its SaaS offerings is “picking up” on the enterprise side. But Schwartz points out that “the infrastructure segment trends should elevate concerns about share losses, and the performance, durability and trajectory of the core business.”
KeyBanc analyst Monika Garg seems a bit less optimistic about the company. The analyst says that Oracle only beat EPS estimates because of a “slight tax break” and its aggressive share buy-back program, which lowered shared outstanding by 602 million (over the past year). Furthermore, Garg says that, while “it seems the company’s Fusion ERP and HCM businesses appear to be seeing growth,” its move to the cloud is still “taking longer than expected.”
Oracle faces strong competition from the likes of Amazon, Microsoft and Google on the cloud side. While the company is among the largest enterprise software makers in the world, Oracle has been unable to keep pace with the three aforementioned rivals. While their cloud businesses have each grown tremendously over the past few years (which has contributed to higher revenue and stock prices), investors have been spooked by Oracle’s slow transition. Perhaps yesterday’s earnings release – with cloud growth at 32% — will be a catalyst for stronger growth to come.
Wall Street sees Oracle the way Garg and Schwartz do. Out of 10 analysts polled by TipRanks in the last three months, seven rate the company a Hold while only three recommend Buy. The 12-month average price target stands at $54.00, marking about 18% upside from where the stock is currently trading. (See ORCL’s price targets and analyst ratings on TipRanks).