Earnings

Oracle share price: what to expect in Q4 earnings

Oracle's share price has rocketed this month as traders buy back into the database giant. In general, Oracle's [ORCL] business has been resilient to the coronavirus outbreak. CEO Safra Catz described fears that the outbreak would affect subscription revenue as 'minimal'. And last quarter’s earnings and revenue growth beat Wall Street expectations. 

But will Q4 be as good? Oracle will be reporting for the three quarters up until May 31, a period when the virus was very much with us. These months saw cloud companies’ share prices grow with the shift to remote working. Oracle’s share price, which has lagged rivals in this area, could join the party post-earnings. However, that depends on any insight during the results into its own cloud ambitions and how it's responding to the 'new normal'.

 

 

What's happening with Oracle's share price?

Oracle's share price is up over 17.4% since 23 March - the point when the Nasdaq started to rally after a brutal coronavirus-triggered selloff. Year-to-date the share price is relatively flat, trading down around 3.9%. Looking back over five years the share price is up 25% lagging far behind cloud rivals Google's 153% gain and Amazon's 485%.

17.4%

Oracle's share price gains since 23 March

  

When is Oracle reporting Q4 results?

16 June

 

What should investors watch out for

Battle for the clouds

The big thing to look out for is any news on Oracle's cloud-native Autonomous Database. Oracle chairman and chief technology officer Larry Ellison has hyped the product as “the most-important product in the company’s history.” And with around half of Oracle's revenue coming from its database products, it could turbocharge Oracle's cloud business. Especially as any customer that wants Autonomous Database must also buy Oracle Cloud Infrastructure.

But details of Autonomous Database revenue have been thin on the ground. Analysts will want to see the hype translated into hard numbers in Q4 results. 

 

Oracle Cloud and Netsuite numbers

Cloud computing is all the rage in the remote-working environment. Oracle has two offerings in this area: Oracle ERP and Netsuite ERP.

Oracle ERP helps businesses run enterprise-wide operations from planning to financial management. While Netsuite ERP, as anyone who has had to enter an online timesheet will tell you, helps with expenses and accounting processes. Ellison has claimed that these products dominate the market, possibly accounting for a 95% share. 

 

What are analysts expecting in Oracle's Q4 results?

Wall Street is expecting earnings to come in at $1.19 per share, down from the $1.27 seen in the same quarter last year. Revenue is expected at $10.84 billion, a 2.6% drop on last year.

Will Oracle beat expectations? In the past two quarters, Oracle has narrowly edged past analyst expectations. Last quarter earnings came in at $0.97, a single cent higher than the forecasted $0.96.

$10.84billion

Oracle's expected Q4 revenue

  

Time to buy Oracle?

Of the 36 analysts tracking Oracle’s share price on Yahoo Finance, 26 rate it a Strong Buy or a Buy. Yet an average 12-month share price target of $50.92 would see a 1.8% downside on Oracle's current share price.

At the end of March, Exane BNP Paribas upgraded Oracle from Neutral to Outperform, pinning a $55 price target on the stock. Hitting this would see a 6.1% upside on the current share price.

JP Morgan analyst Mark Murphy also upgraded his rating on the stock in March, moving it from Neutral to Overweight. The analyst suggested that the 'stickiness' of Oracle's product is a strength and also pinned a $55 share price target on the stock.

"However, in our view everything that screens so 'wrong' with this stock in a bull market or economic expansion flips around if we apply the different lens that is required for the different type of environment we might be entering into," Murphy wrote in a note to investors.

 

Market Cap$163.545bn
PE ratio (TTM)16.31
EPS (TTM)3.18
Quarterly Revenue Growth (YoY)1.90%

Oracle share price vitals, Yahoo Finance, 15 June 2020

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