Software license and cloud subscription revenue of $2.38B was inline with consensus and slightly below analysts estimate ($2.42B). The impact of SaaS / subscription on this line is still not clear but likely still a slight headwind. Q2 was a tough comp from a year ago and Q3 and Q4 are easier comps, thus the business should appear to be firming and there are likely some underlying drivers to this. Apps remains challenged although not likely worsening, while database is stable and 12c adoption remains in front of Oracle Corporation (NYSE:ORCL).
Execution appears stable, ramping sales hiring (again)
With both Americas and Europe up slightly Y/ Y, (w/tough comps), execution is stabilizing. Asia was weak as others have seen (Australia and Japan-related, not China for Oracle Corporation (NYSE:ORCL)).
Coho Capital 2Q20 Commentary: Podcasts, The New Talk Radio
Coho Capital commentary for the second quarter ended June 30, 2020. Q2 2020 hedge fund letters, conferences and more Dear Partners, Coho Capital returned 46.6% during the first half of the year compared to a loss of 3.1% in the S&P 500. Many of our holdings, such as Netflix, Amazon, and Spotify, were perceived beneficiaries Read More
Revenue upside offset by more spending
Slight revenue upside was met with higher sales and marketing spend as the company continues to add sales capacity. Investors have become skeptical here as prior “investments” in sales appeared to back-fill turnover. Analysts at Citi expect that execution in 2H of year will be important to validating the increased investment. Tax drove the $0.02 of EPS upside vs. analysts’ est.
Oracle Management talking up 12c
Analysts have pointed to a re-invigoration of the core database franchise as a potential catalyst to revenue as well as the share’s multiple. Management noted, for the first time since 12c’s July release, it expects to see uplift in revenue from 12c.
Sales execution continues to stabilize at Oracle Corporation (NYSE:ORCL) and analysta at the firm believe investor focus on secular concern around the database should subside with traction of 12c. Citi believe these two factors can drive outperformance for the stock with shares currently trading in the lower-end of valuation range (+/- 20% vs. S&P). Oracle Corporation (NYSE:ORCL) remains Citi’s preferred mega cap at these levels over Microsoft Corporation (NASDAQ:MSFT) and SAP AG (NYSE:SAP). Analysts’ numbers come up slightly for FY14 ($2.88 -> $2.92) and their price target notches up to $39 from $38 on these higher estimates.