Microsoft Replaced by Oracle on Goldman List

Goldman Sachs software analyst Sarah Friar Tuesday removed Microsoft (MSFT) from the firm’s “Americas Conviction List,” and replaced it with Oracle (ORCL).

Goldman maintains its Buy rating and $39 price target on Microsoft, but contends there is more near-term upside in Oracle, “now that Microsoft’s Q1 earnings catalyst has passed.” Friar notes that MSFT shares had gained 21.1% since being added to the list on October 16 through Monday night. “The stock’s 15% move since earnings has tempered the risk/reward somewhat, although in our view Microsoft also remains a good defensive play in a tougher spending environment given portfolio breadth, balance international exposure, discounted valuation and product cycle tailwinds,” she writes.

As for Oracle, she says that the company’s consolidation strategy has given it “an expansive product set, resulting in greater account control and tremendous cross-selling opportunities.” She says that given an outlook for “20% type earnings growth…some degree of multiple expansion is warranted.” She sees potential catalysts in next week’s Oracle OpenWorld user conference, an accompanying analyst meeting, and November quarter earnings to be reported in mid-December. Friar’s price target on Oracle is $27.

Microsoft Tuesday is down 77 cents, or 2.1%, at $35.96. Oracle is up 42 cents, or 1.9%, at $22.49.

One other note: Goldman until today had a “not rated” designation on Oracle, apparently due to the fact that Goldman has been advising BEA on Oracle’s now-lapsed takeover bid. If Goldman’s work on that score is done, it doesn’t bode well for any near-term sale of BEA (BEAS), does it?

MSFT vs ORCL 1-yr Chart: