Oracle (ORCL) shares are getting a lift Friday from Bank of America/Merrill Lynch analyst Kash Rangan, who Friday repeated his Buy rating on the stock and lifted his price target to $24 from $20.
Rangan writes in a research note Friday morning that his checks indicate that close rates in both the applications and technology segments at Oracle in the U.S. were likely better than management’s expectations heading into the recently ended May quarter. He adds that the weakened dollar could boost profits by about 3 cents a share in the quarter. (A point Morgan Stanley’s Adam Holt made yesterday in raising his own target on the stock.)
Rangan thinks pro forma EPS for the May quarter could be at the top end of the guidance range of 42-46 cents a share.
Meanwhile, he thinks the pending Sun Microsystems (JAVA) acquisition could boost FY 2010 EPS by 16-26 cents a share.
As for the Sun hardware business, he says that ORCL can “create economic value” whether or not it decides to keep it. Rangan sees several way to “nurture the hardware business to profitability,” including “wringing out” excess sales, marketing and R&D expenses, and “right-sizing the business,” possibly by backing away from x86 server market and focusing on Solaris and SPARC. He also thinks the company could offer a hardware appliance for running ORCL sotware , and he sees room for improved monetization of Java.
ORCL closed up Friday 41 cents, or 2%, to $20.66.