Oracle rises as Piper Sandler upgrades, citing potential for improving margins
Justin Sullivan

Oracle (NYSE:ORCL) shares rose on Thursday as Piper Sandler upgraded the IT services giant, noting there is the potential for improving margins now that operating margins have slid to an eight-year low.
Analyst Brent Bracelin raised his rating to neutral from underweight, noting that operating margins are below 40% and gross margins are at 74.5%, a move exacerbated by the Cerner acquisition and the company's continued transition to the cloud. There is light at the end of the tunnel, however, the analyst said. 
"[Fiscal first-quarter] could mark a margin trough as Cerner cost synergies begin to appear and Oracle refocuses on driving operating efficiencies as the cloud business scales," Bracelin wrote in a note to clients.
The analyst added that cloud adoption across software-as-a-service and infrastructure-as-a-service segments have been "better than feared" and there could be a path towards improving the operating margin profile, due in part to synergies from the Cerner deal. 
Oracle (ORCL) shares rose fractionally to $66.70 in premarket trading. 
Bracelin also noted that Oracle's (ORCL) debt is now above $90B, which has hurt the size and scale of share buybacks and could place added pressure on the company's finances in the wake of rising interest rates. But if the company is able to maintain cash flows, it should not be a long-term issue.
"Assuming operating cash flows can exceed $15B annually, there should be ample flexibility to reduce debt and restart buy-backs over time," the analyst pointed out. 
Oracle (ORCL) is slated to hold an analyst day on Thursday that could give more insight into the company's financials. While foreign exchange has continued to be a headwind, it's possible the company's management team will give more insight into its cloud business and margin potential, Bracelin added.
On Tuesday, Oracle (ORCL) said it was expanding its existing partnership with Nvidia (NVDA) in an effort to boost artificial intelligence adoption in the enterprise.
Analysts are universally cautious on Oracle (ORCL). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. In addition, Seeking Alpha's quant system, which consistently beats the market, rates ORCL a HOLD.
A previous version of this story said Oracle's debt was $990B. It is $90B. Seeking Alpha regrets the error.