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NetSuite's Solid Quarter Overshadowed By Oracle Deal News

NetSuite's Solid Quarter Overshadowed By Oracle Deal News - Netsuite Inc NYSE:N, Oracle Corporation NASDAQ:ORCL

NetSuite Inc N 0.41% reported robust 2Q16 results, although they were overshadowed by the agreement to be acquired by Oracle Corporation ORCL 0.36% for $9.3 billion.

BTIG’s Joel P. Fishbein, Jr. maintains a Neutral rating on NetSuite.

2Q Performance

“We remain positive on the company’s fundamentals in the mid-market, and think NetSuite should benefit from the greater investment associated with the acquisition by a larger, enterprise-focused competitor,” Fishbein mentioned.

While execution remained solid during 2Q, the analyst stated that the company is well-positioned as it begins to transition to operating under the Oracle umbrella.

Related Link: MKM Partners: Oracle-NetSuite Deal Is Bold, Fraught With Risks And Opportunities

For 2Q, NetSuite reported top-line growth of 30 percent year-on-year, and Fishbein continues to be position on the company’s long-term mid-market ERP and commerce opportunity.

Billings grew 27 percent year-on-year, in line with expectations and implying robust momentum, while operating margin stood at 3.2 percent and the EPS of $0.08 beat consensus.

The Oracle Deal

Fishbein pointed out that the deal with Oracle represents a 44 percent premium to NetSuite’s “clean price” of $75.85.

“We like the transaction as NetSuite should effectively operate as Oracle’s mid-market brand. Oracle’s resources should propel strong innovation/R&D and improved go-to-market scale, especially as NetSuite seeks to expand internationally,” the analyst said.

There does not appear to be any meaningful risk to the deal closing, and both companies were trading flat on the day at time of writing.

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DateFirmActionFromTo
Jul 2016Goldman SachsUpgradesSellNeutral
Jul 2016Morgan StanleyUpgradesUnderweightEqual-weight
Jul 2016JP MorganDowngradesOverweightNeutral

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