Oracle management called into question after mixed earnings report

Oracle Chairman Larry
Ellison and CEO Safra Catz face strong skepticism from Wall
Street.
Business
Insider

• Wall Street analysts had a bone to pick with Oracle in notes
  to their clients published Tuesday, following mixed results in
  Oracle’s first quarter FY2019 earnings on Monday.
• Goldman Sachs lowered its price target for the database
  giant, while others questioned whether management is up to the
  task of reigniting growth. 
• Oracle reported revenue growth of just 1% year-over-year,
  leaving some on Wall Street feeling that transformation at the
  company “continues to take longer than hoped.” 

Wall Street is starting to get impatient with Oracle.

Following a
hit-or-miss earnings report on Monday that showed a glacial
pace of growth, analysts expressed a range of skepticism that the
database giant can make good on its promises to expand its cloud
market share — with some even questioning whether the existing
management team has what it takes to make it happen. 

Goldman Sach’s Heather Bellini retained her buy rating on
shares of the company, but lowered her price target for Oracle
from $56 to $55, noting that transformation at Oracle “continues
to take longer than hoped.” 

Morgan Stanley’s Keith Weiss maintained his price target of $57
but acknowledged that Oracle’s declining recurring revenue
“likely leaves investors unconvinced” on the durability of growth
at the company. 

Oracle’s revenue growth — just 1% year-over-year — looks
especially slow when compared to its competitors.

“Though management used the word ‘growth’ on its earnings call 24
times, the main challenge for Oracle is the lack
thereof, in our opinion,” Pat Walravens, an analyst with JMP
Securities, wrote in a note Tuesday. 

Walravens contrasted Oracle’s sleepy results to 39% growth at
Amazon, 4% growth at SAP, 22% growth at Microsoft and 27% growth
at Salesforce in each of their most recent earnings reports,
covering the same period.

Though he maintained his neutral rating on Oracle, Walravens also
questioned whether the company’s executive team of co-CEOs Safra
Catz and Mark Hurd, along with executive chairman and chief
technology officer Larry Ellison, could ever make good on their
promises.  

“At a high level, we continue to believe
that Oracle needs to focus less on winning and more on
its customers’ success to drive growth,” he wrote. “Whether that
can happen under this management team is another question.”

Indeed, others on Wall Street expressed skepticism that Oracle’s
management team can take the company to the next level.

The company recently stopped reporting its cloud revenue, instead
folding those figures back into other product categories, which
makes it difficult for analysts to chart growth in those key
areas. This makes it easy for bears to suspect that Oracle’s
cloud revenues are decelerating when revenue figures come in
below analyst expectations, wrote Barclays’ Raimo Lenschow, who
maintained his overweight rating of the stock.

“With these items no longer broken out separately, investors have
to rely on management’s comments, but credibility has suffered as
of late,” Lenschow wrote.

Oracle’s mixed earnings results sent the stock tumbling after
hours on Monday. The stock slid nearly 4% after hours 
Monday, though it’s since recovered to its earlier price. 

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