Analyst Comments on Oracle (ORCL) with the NetSuite Acquisition Being on TrackBy Carrie Williams
Enterprise software giant Oracle Corporation (NYSE: ORCL) finally closed the purchase of leading integrated cloud business software suite Netsuite at the original bid price of $9.3 billion, $109 per share. ORCL received the backing of 53.21% of NetSuite’s unaffiliated shares after weeks of conflict with a large investor T. Rowe Price (who abstained from the shareholder vote) over the price tag for the acquisition. Oracle had responded with a take-it-or-leave-it offer and a Friday deadline, which was quickly accepted by the shareholders. Netsuite is scheduled to be delisted from NYSE from November 18th.
Reacting to the news today, Societe Generale analyst Richard Nguyen maintained their Buy rating and a $46 price target on ORCL in a research note issued to investors. The price target is an upside of 17.67% from the current price of $39.09. The 158.70 billion market cap stock is currently trading above its 20-day SMA of $38.25.
Richard-Hidden considers the NetSuite acquisition to bring in several positives for Oracle. With an expected revenue growth of 65%, ORCL would be firmly placed as the frontrunner in terms of revenue among major legacy software vendors transitioning to the cloud. ORCL’s expansion into the SMB/mid-market would also be made easier thanks to the existing 30k strong clients of NetSuite.
Oracle is also expected to perform very well in the SaaS ERP mid-market edging over rivals like Microsoft, Sage Group, SAP, and Infor. This is because NetSuite has a large installed base in SaaS ERP (SGe >20k clients) which would help Oracle claim the top spot in the strategic market.
Even though niggling issues like the possible departure of senior management of Netsuite, chances of short-term business disruption at NetSuite due to the merger, as well as the new turf of e SMB (Small and Medium Business) market for Oracle are present, they are clearly offset by the major positives brought about by the acquisition.
The deal comes in at a crucial juncture for Oracle, due to increasing customers demand for software delivered over networks instead of installing programs on their own servers, making the shift to cloud an essential part of company’s future growth plan.
Oracle Corp has currently a Moderate Buy rating consensus rating based on recent 25 analyst ratings, according to TipRanks.com data. The average analyst price target on the stock is $44.95, which represents an upside of 14.99% from the last close price.