By Sam Boughedda
Oracle (NYSE:ORCL) may be able to buck the macro trend, according to Morgan Stanley, while Deutsche Bank said the company is becoming more strategic, on Monday.
The analysts released notes on the software company ahead of its fiscal third-quarter results on Thursday, March 9, after the close.
Morgan Stanley analysts told investors in a note that the firm's CIO survey, channel checks, and analysis of the drivers of license outperformance "suggest Oracle may be able to yet again buck the macro trend."
However, they believe the investor focus shifts more towards margins, gross margin recovery, and further opex savings "as they look to underwrite the current multiple."
"Oracle managed to largely buck the macro trend over the past several quarters, delivering durable Cloud revenue growth and upside on license and hardware revenue in Q2," the analysts, who have an Equal-weight rating and a $90 price target on the stock, wrote. "We see the key investor debates heading into Q3 earnings results to focus on three key topics: 1) cloud momentum; 2) license revenue upside; and 3) cost reductions from Cerner.
In addition, they said Morgan Stanley's checks indicate Oracle's cloud momentum should sustain in the third quarter, while their CIO survey and view of the potential drivers of the second quarter license outperformance "suggest the potential for upside ahead."
At Deutsche Bank, analysts told investors in a note that their strategic checks "reflect Oracle becoming more strategic despite NT deal slippage."
"Our F3Q checks suggest underlying customer interest remains very healthy if not improving, particularly for Cloud (both SaaS and OCI); however, the quantity of deals (specifically net new initiatives) slipping out of F3Q was elevated as customers navigate macro cross currents," said Deutsche Bank analysts, who have a Buy rating and $120 price target on the stock.
"Positively, we hear from multiple sources that ELA/ULAs (Enterprise/Unlimited License Agreements) are very much back in fashion after slowly waning over several years; we see this as an important proxy for Oracle's strategic relevance to its customers. On balance, customers seem to be making longer, more durable commitments to Oracle," they added.
Overall, Deutsche Bank remains firm in its constructive view on Oracle and sees several positive factors "driving the potential for organic revenue acceleration and EPS upside in FY24 and beyond."