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Oracle Price Target Raised At BTIG, Implies 15.5x Forward EPS

The much-awaited inflection point in Oracle Corporation’s ORCL 0.24% cloud business seems to have arrived, BTIG’s Joel P. Fishbein said in a report. He maintained a Buy rating on the company, while raising the price target from $44 to $47.

Oracle continues to face stiff competition across its SaaS and PaaS businesses. Analyst Joel Fishbein expects the new software license/on-premise business to “erode at a double-digit pace over the next few years.”

Cloud Transition Almost Complete

“The heavy lifting on the cloud transition looks to be done,” Fishbein commented. Although Oracle’s shares have gained 13 percent year-to-date, there seems to be further upside. The company seems to be at the much-awaited inflection point in the cloud business, and it is likely to generate enough revenue growth to offset the expected decline in the on-premise business.

The analyst expressed optimism regarding gross margins expanding 15 percentage points in FY17 to above 60 percent and reaching around 70 percent by FY18. Moreover, increased sales productivity would likely result in operating margin expansion, higher cash flow and nearly double-digit EPS growth by FY18. “This in turn should drive multiple expansion,” the BTIG report added.

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DateFirmActionFromTo
Jul 2016BTIG ResearchMaintainsBuy
Jul 2016BMO CapitalUpgradesMarket PerformOutperform
Jun 2016JP MorganUpgradesUnderweightNeutral

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