Oracle only grew 1% last quarter, and Wall Street is starting to question whether management is up to the job

Business Insider

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

• 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.

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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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