Cloud Computing Excitement Drives Oracle Valuation Too High
June 21, 2015
Grazed from Seeking Alpha. Author: Editorial Staff.
We are initiating coverage on Oracle (NYSE:ORCL) with a $32 1-year Price Target and a ‘Sell’ rating. While cloud revenue growth is surging, it is an overstated segment of the business. We believe that Oracle’s structural transition to cloud computing has driven the current stock value too high.
The software market for midsized businesses and large enterprises is shifting from on-premise systems to the cloud. Oracle is responding to the market by transitioning its software sales to cloud computing services…
This translational period, however, will by coincided by a period of stagnation. While cloud service revenues grow, Oracle’s majority of revenues from software license sales will fall. Revenue and earnings growth will suffer until FY2018 when cloud revenues surpass software license revenues…
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