Oracle Chairman and Chief Technology Officer Larry Ellison.
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Oracle shares have been on a roll. The enterprise software giant has rallied 25% since it was featured on the cover of the Feb. 22 edition of Barron’s. As that piece argued, Oracle is getting traction in its shift toward the cloud across its primary business lines—database software and enterprise applications—while making progress with its nascent public cloud unit, Oracle Cloud.
On Thursday, Cowen analyst J. Derrick Wood reiterated his Outperform rating on Oracle shares (ticker: ORCL), while boosting his target price to $85 from $77. He notes that the higher target follows investor meetings Cowen hosted with management. “We think the framework for growth acceleration is strengthening as we exit the pandemic,” driven by both Oracle Cloud and Autonomous Database, a cloud-based version of the flagship Oracle database software, he notes.
On database software, Wood writes, the company “remains confident on demand trends,” with growing traction for Cloud@Customer. Launched in 2020, Cloud@Customer mimics the structure of a public cloud, but operates inside corporate data centers. Oracle runs the hardware and software, collects revenue on a subscription basis, and provides performance guarantees, but the servers sit on the customer site.
On Oracle Cloud, Wood writes that the company is seeing growth not only for Oracle software workloads, but also for non-Oracle applications like video communications. (The company previously has noted that both Zoom Video Communications [ZM] and 8X8 [EGHT] are customers.)
As for enterprise applications, Wood says management is “confident in its leading position” in enterprise resource planning, or ERP. He says management noted that the pandemic has sparked more conversations about migrating more enterprise applications to the cloud—and that more projects should make the shift as the economy recovers, boosting growth in both cloud-based ERP and human-capital management software.
“We think the framework is strengthening to drive more sustainable growth acceleration,” he writes. “Trading at 15.5 times our fiscal year 2022 earnings estimate of $4.92 a share, we think valuations remain attractive.”
Despite the bullish note, Oracle stock is down 2.7%, at $74.85, in recent trading. The S&P 500 is flat.
Write to Eric J. Savitz at [email protected]
