Shares of Oracle (ORCL) are under pressure on Thursday despite better than expected third-quarter earnings per share, as revenue growth for the quarter at constant currency fell short of management's guidance range and quarterly earnings guidance disappointed. Following the results, Societe Generale analyst Richard Nguyen downgraded the stock to Hold, saying valuation has "caught up to speed with fundamentals."

RESULTS: Oracle reported third-quarter adjusted earnings per share of $1.16 and revenue of $10.1B, with consensus at $1.11 and $10.07B, respectively. However, sales were flat on a constant currency basis and missed Oracle's growth projection of 1%-3%. The enterprise software maker reported third-quarter Cloud Services and License Support revenues of $7.3B, up 5%, and Cloud license and on-premise license revenues of $1.3B, up 4%. For the fourth quarter, Oracle sees earnings per share between $1.28-$1.32 in USD or $1.20-$1.24 constant currency, with consensus at $1.28. The company also sees fourth-quarter revenue up 5%-7% in USD.

Additionally, Oracle announced that its board of directors increased the authorization for share repurchases by $20B and declared a quarterly cash dividend of 32c per share of outstanding common stock, reflecting a 33% increase over the current quarterly dividend of 24c. Larry Ellison, Oracle's Chairman of the Board, Chief Technology Officer, and largest stockholder, did not participate in the deliberation, or the vote on this matter, the company noted. This increased dividend will be paid to stockholders of record as of the close of business on April 8, with a payment date of April 22.

MOVING TO THE SIDELINES: Societe Generale analyst Richard Nguyen downgraded Oracle to Hold from Buy with a price target of $76, up from $70 after the company reported third-quarter results with a beat on earnings and gave fourth-quarter guidance that was "broadly in line" with expectations. For the fiscal year 2021, Nguyen "nudged up" his sales estimates by 1.1% and his earnings per share estimate by 1.3%. For the fiscal year 2022, he increased his revenue and earnings per share forecasts by 1.2% and 3.8%, respectively.

While "impressed" by Oracle's strong traction in cloud ERP and Autonomous Database operations, the pace of growth in both businesses continued to decelerate in recent quarters and Nguyen does not anticipate a sharp acceleration in revenue growth over fiscal years 2022-2023. The analyst thinks the stock's valuation has caught "up to speed with fundamentals." While Oracle continues to trade at a deep discount relative to its U.S. peers, it is justified given its lower growth profile, Nguyen contended.

Also on the sidelines, Stifel analyst Brad Reback raised the firm's price target on Oracle to $62 from $56 and kept a Hold rating on the shares after what he calls "another lackluster quarter and guide." Reback said the half-life of Oracle's recurring revenue is "significant," but he sees the stock as "a continued laggard in coming years" given Oracle's weaker position in Infrastructure-as-a-service and the "nearly insurmountable lead" that Amazon Web Services (AMZN) and Microsoft's (MSFT) Azure have in the hyperscale cloud market.

Morgan Stanley analyst Keith Weiss also raised his price target on Oracle to $73 from $67, while keeping an Equal Weight rating on the shares. Weiss said another quarter of flat constant currency growth and a forecast for 1%-3% year-over-year constant currency growth "against a much easier Q4" comparison likely leaves investors asking, "where's the growth?" Oracle's low multiple, share buybacks and dividend increase keep "the value story intact," but investors looking for a rebound story are "likely disappointed" after the company's quarterly report, Weiss added.

REVENUE SEEN ACCELERATING AS HEADWINDS ABATE: More bullish on the stock, Wells Fargo analyst Philip Winslow raised the firm's price target on Oracle to $85 from $68.75 and kept an Overweight rating on the shares. As the headwinds from the transition to the cloud abate relative to the increase in recurring subscription revenue and as customers lift-and-shift database workloads to Oracle Cloud, the analyst believes the company can accelerate revenue and operating income growth. His long-term positive thesis remains that Oracle is positioned to leverage its on-premise enterprise installed base, large application developer and DBA ecosystem, and differentiated technology portfolio to emerge as a Top 5 vendor in the combined PaaS/IaaS market and the most complete portfolio of cloud applications to be the number two player in SaaS.

Monness Crespi analyst Brian White also raised the firm's price target on Oracle to $93 from $82, while keeping a Buy rating on the shares. The company reported "solid" fiscal third-quarter results and offered a "healthy" fourth-quarter outlook, White told investors in a research note. The analyst believes Oracle offers investors a "high-quality, value play with the opportunity to capitalize on the company's cloud transformation and increasingly attractive model."

PRICE ACTION: In morning trading, shares of Oracle have dropped over 7% to $66.72.