Before the market opened on Tuesday, Oracle stock ( NYSE:ORCL ) was up about 3%. This was due to strong growth in the cloud, which aided the tech giant’s earnings in the second quarter. However, some Wall Street analysts are concerned about the company’s free cash flow.
Morgan Stanley Analyst Gives Price Target of $90
According to Morgan Stanley analyst Keith Weiss, the company “continues to defy a weakening macro backdrop.” Oracle stock is rated equal weight by him, and his price target is $90. He stated that the company’s revenue growth is “accelerating,” and that its license and hardware businesses are performing exceptionally well.
On the other hand, the cloud infrastructure business’s expenses continue to rise, which hurts free cash flow growth and should be monitored by investors.
Weiss told clients in a note that “further increasing capex spend in service of the [Oracle Cloud Infrastructure] business continues to put pressure on Oracle’s free cash flow,” despite the company’s strong second-quarter revenue and bookings.
The free cash flow for the quarter was $1.586 billion, compared to $8.395 billion the previous year. This represents an 18% increase over last year, but it is “significantly less” when the lawsuit settlement from last year is taken into account.
Weiss also stated that, despite cloud’s success throughout the quarter and the positive third-quarter estimate, fiscal 2023 might not be as consistent as fiscal 2022.
According to Weiss, “bottom-line, with investors expecting big Cloud deals (which happened), aggressive expense cuts at Cerner (which will take time), and a durable back-office application story (which has been consistent), to yield upside in Q2, coming out of the quarter wit...
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