Oracle Corp.’s cloud offerings and its Cerner business were highlights of the software company’s second-quarter results, analysts say.
beat Wall Street’s top- and bottom-line expectations with its fiscal second-quarter results on Monday, even though the company delivered a mixed outlook, exceeding the consensus view with the implied revenue forecast but missing with its profit targets.
Nonetheless, the report was “practically perfect,” in the view of Bernstein analyst Mark Moerdler.
“The strength of the quarter and the guidance continues to prove how well positioned Oracle is to weather the economic turbulence successfully,” he wrote, while reiterating an outperform rating and bumping up his price target by a buck, to $103. “As we have written previously and this quarter further validated, we believe Oracle is the best risk/reward in software.”
Lifted by the results, Oracle’s stock rose 4.6% shortly after the market opened on Tuesday. Oracle’s stock has fallen 2.8% in 2022, compared with the S&P 500’s
decline of 14.5%.
In a note released on Tuesday, JPMorgan pointed to health across Oracle’s business and to continued momentum around the company’s Oracle Cloud Infrastructure (OCI) offerings. Oracle noted that multiple $1 billion-plus OCI deals closed during the quarter, which likely includes a “large win” from Amazon.com Inc.’s
Amazon Web Services, according to JPMorgan.
“Overall, we believe Oracle’s resilient, sticky, and largely recurring revenue stream positions the company well to relatively outperform in a post-pandemic environment,” wrote JPMorgan analyst Mark Murphy. “We are encouraged by the underlying organic revenue growth and solid organic backlog growth in the recent quarter and believe the cloud shift continues to progress.”
Oracle’s acquisition of electronic-medical-records company Cerner is also driving automation in global healthcare, according to Murphy. The tech giant completed its $28.3 billion acquisition of Cerner in June.
Those sentiments were echoed by Stifel analyst Brad Reback.
“Oracle produced solid [fiscal second quarter 2023] results,” he wrote in a note released on Tuesday. He said the company’s results were boosted by its Cerner business, which contributed $1.5 billion to Oracle’s revenue, and by solid performance from Oracle’s Application and Infrastructure segments.
“[Earnings per share] was also modestly better as the company garners savings from the Cerner integration and benefits from increasing Cloud scale,” he added.
Reback noted that that Oracle is investing heavily, with capital expenditures increasing to $2.4 billion to meet accelerating demand, with triple-digit infrastructure-as-a-service bookings growth.
“According to management CapEx is expected to stay at this level for the next few quarters,” Reback wrote. “Given the near-term Cerner tailwinds and existing Oracle customers lifting and shifting [on-premises] work loads to the Oracle Cloud, we expect consistent short-term results.”
Stifel raised its Oracle price target to $75 from $72 Tuesday.
Of 31 analysts surveyed by FactSet, 11 have an overweight or buy rating, 17 have a hold rating and three have an underweight or sell rating.