Goldman Sachs reinstates Oracle at Sell, boosts Atlassian to Buy
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Goldman Sachs has reinstated coverage of Oracle (NYSE:ORCL) with a Sell rating, part of rebalancing its software company coverage amid a weaker economic backdrop.
The company's fourth-quarter earnings topped expectations, but while reaccelerated revenue growth looks encouraging on its face, excluding a beat in cloud and on-premise license means growth was flat to down slightly, the firm said.
It's seeing a negative risk-reward citing a number of reasons: Goldman Sachs wants more clarity on the $28B Cerner acquisition and it means for Oracle Health; database market share is steadily declining as rivals including Microsoft, Google, Amazon and MongoDB win new workloads; tighter budgets from customers will press new Cloud revenue business despite some recent momentum; and another year of elevated capital expenditures into a downturn constrains free cash flow generation.
The firm set a $75 price target, implying 6% upside.
In the same review, Goldman Sachs upgraded Atlassian (NASDAQ:TEAM) to Buy from Neutral, saying it's incrementally more positive as the company reaches a "pivotal moment" in its cloud transition.
At an analyst day in April, Atlassian announced a target to grow Cloud revenue about 50% in both 2023 and 2024 - a goal that looked challenging with the macro backdrop, Goldman says. But breaking down the numbers suggested confidence in the 2024 goal, as Atlassian "can can reach these targets with only ~3% (year-over-year) growth from migration revenue in FY23."
It's boosted its price target on Atlassian to $300 from $279; with TEAM up 0.9% today, the target implies 45% upside.