Oracle Corporation (NYSE:ORCL) jumped almost 4% after it announced its third quarter 2015 financial results on Tuesday, March 17th. Despite missing revenue expectations due to currency headwinds, the company came in line with profit expectations, increased its quarterly dividend, and expressed strong confidence in its cloud computing business.
Highlights from the report include earnings of $0.56 a share on a diluted basis, staying in line with analysts’ expectations and remaining flat year-over-year. The company’s total revenue came in at $9.327 billion, falling short of analysts’ expectations of $9.51 billion, but marking a 6% increase from the same quarter a year prior.
Oracle increased its quarterly dividend from $0.12 to $0.15. However, the focus of Oracle’s report was its cloud-computing business. The company reported that it raked in roughly $200 million in new cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) annual recurring revenue, coming ahead of its own forecast by $50 million. Oracle now expects to make about $1 billion by the end of 2015.
Oracle CEO, Mark Hurd commented on the company’s cloud business, “In Q3, we sold nearly $200 million of new SaaS and PaaS business as measured in annual recurring revenue…In Q4, we expect to sell over $300 million of new SaaS and PaaS annual recurring revenue. That means we have a real chance to sell more SaaS and PaaS new business this coming quarter than any other cloud services provider. I think our hyper-growth in the cloud comes as a big surprise to a lot of people.”
UBS analyst Brent Thill weighed in on Oracle on March 18th, reiterating a Buy rating on the stock and raising his price target from $47 to $48. He noted, “we believe the success of the Cloud transition is becoming more evident, gaining steam, and does not appear to be coming heavily at the expense of margins, as widely feared. Backed by positive pipeline commentary, bookings growth trajectory (100%+ y/y), and increasing ARR views ($300M in F4Q vs. prior $250M), we think current momentum should continue.”
Brent Thill has rated Oracle 15 times since March 2009, earning an 86% success rate recommending the company and a +17.3 average return per recommendation. Overall, he has a 73% success rate recommending stocks and a +15.5% average return per recommendation.
Separately, MKM Partners analyst Kevin Buttigieg maintained a Neutral rating on Oracle on March 18th with a $44 price target. He stated, “We’ve been looking for stable license revs and growing Cloud revs to act as a catalyst for ORCL shares, and though they largely delivered on those objectives in F3Q15, other cloud transition challenges that were previously not present at ORCL (but have been for peers) now emerged. Specifically, op. margins are under some pressure as is total software growth, reflected in lowered guidance, and is possibly attributed to the lower-margin cloud revs growing faster than expected and taking share from license to a greater degree than previously realized. In the past, while ORCL’s license revs had been under pressure, margins and guidance.”
Kevin Buttigieg has given Oracle 4 Neutral ratings since June 2011 with no average return on the stock. Overall, he has a 50% success rate recommending stocks and a +5.2% average return per recommendation.
On average, the top analyst consensus for Oracle on TipRanks is Moderate Buy.