Oracle Corporation reiterated as Buy by UBS
Analyst Brent Thill at UBS maintained Buy rating for Oracle Corporation (NYSE:ORCL), after the company announced a shift in its strategy and reversed its strategic viewpoint regarding LaaS and PaaS. It now clearly appears to aim towards Amazon’s AWS (Amazon Web Service) dominance.
The analyst noted that its much awaited and expanded slate of a range of Cloud Infra Offerings appear to compete with its margin-rich, entrenched and on-premise portfolio. However, this appears to be the right shift in strategy for the company to protect its core, despite it seems to be very much painful at outset.
The UBS analyst mentioned some of the positives regarding the stock, which included its ability to deliver on the front of a truly hybrid vision for future. It also has robustness on the front of core tech. Also, other positives included deepening Cloud Infra engineering, the hindsight-driven advantage related to innovation etc.
The analyst also questioned if Oracle Corporation could navigate this phase of transition in a profitable way or not, considering the structural lower margin and price competitive dynamics of the market, and Oracle’s small and current scale (Laas/Paas run rate and ARR bookings of around $400 million as compared to Amazon Web Services around $12 billion run rate revenues). The Capital Expenditure (CAPEX) leaders of hyperscale players, such as Google, Microsoft, Amazon Web Services, have already attained $28 billion, $20 billion and $11 billion respectively in the past three years as compared to Oracle’s $3 billion.
The analyst has made no changes to the price target for the stock of $44.00. The stock performance for the year has been substantial, i.e. 7.29%, which reflects the investors’ confidence in the stock. However, it has recently started to decline and has resulted in a drop of 3.91% in past one month of trading.