Analyst Note| Julie Bhusal Sharma |
Oracle reported second-quarter fiscal 2021 results beating CapIQ consensus estimates for revenue and adjusted earnings per share. Notably, on the earnings call, however, was Chairman Larry Ellison’s comments on how Oracle’s supply fell short of demand as a result of Oracle’s lack of capacity in Oracle Cloud Infrastructure, or OCI,--which is Oracle’s infrastructure as a services, or IaaS, offering. While demand for Oracle’s IaaS is encouraging, Oracle’s inability to forecast such demand is not, and we expect overall demand for OCI to still fall short of what demand is for more robust IaaS competitors like AWS and Azure. Considering the quarter’s results and third-quarter outlook roughly in line with our former expectations, we are maintaining our fair value estimate of $53 per share for Oracle. With shares hardly moving around its $60 per share market price afterhours, we would recommend waiting for a pullback before committing capital to the wide-moat name.