Oracle (ORCL) is Past The Profit Trough - Drexel Hamilton

Drexel Hamilton analyst, Brian White, believes the worst of the cloud transition is behind Oracle (NYSE: ORCL) and the company is past the trough in its operating profit cycle. No change to Buy rating but PT increases to $51.

Oracle reported a strong 3Q:FY16 performance with excellent cloud metrics, healthy EPS upside and plans to repurchase an additional $10 billion in stock. Oracle offers investors the characteristics of a more defensive tech stock with the benefits of a rapidly growing cloud portfolio.

Oracle reported 3Q:FY16 non-GAAP sales of $9.01 billion (down 3% YoY), which slightly missed Street consensus of $9.12 billion and was up 1% in CC, while pro forma EPS of $0.64 beat consensus of $0.62. For 4Q:FY16, Oracle expects non-GAAP sales to be down 2% to up 1% YoY in CC and pro forma EPS in CC to be $0.82-0.85 with a $0.02 impact from FX.

Oracle's SaaS/PaaS bookings rose by 77% in constant currency (vs. up 75% in 2Q:FY16) and SaaS/PaaS deferred revenue increased by 96%. During 3Q:FY16, non-GAAP cloud revenue (i.e., SaaS/PaaS at $585 million and IaaS at $152 million) reached $737 million (up 60% YoY in CC for SaaS and PaaS and up 2% for IaaS).

FY:17 EPS goes to $2.78 from $2.67 bringing the PT up to $51 from $46.

For an analyst ratings summary and ratings history on Oracle click here. For more ratings news on Oracle click here.

Shares of Oracle closed at $38.74 yesterday.

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