Weekly Notes: Oracle, Salesforce, SAP SE and Symantec

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It was an eventful week for the Technology sector. Most notably, three major technology companies announced to break themselves into smaller entities for greater management control. While specific events influenced trading prices for certain stocks, wariness in the market prior to the onset of the earnings season continued to drag down index performances during the week.

In this report, we present some of the key events for Oracle Corp. (NYSE:ORCL), Salesforce.com (NYSE:CRM), SAP SE (NYSE:SAP) and Symantec (NASDAQ:SYMC) from the past week.

Oracle Corp.

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Oracle has been preparing investors, customers and technology professionals for its annual OpenWorld convention to be held in San Francisco beginning October 25, 2014. The company has announced the launch of a slew of new product offerings on October 01 in its hardware and application software business lines. The convention is likely to have nearly 800 product demos lined up, with Oracle demonstrating new cloud applications in Customer Experience, Human Capital Management, Workforce Management, Enterprise Resource Planning etc. for specific industry verticals.

Shares of Oracle have maintained a flattish trend through the week, declining with the market on Monday and Tuesday before making up for those loses on Wednesday and Thursday. We have a $46 price estimate on Oracle, approximately 19% higher than its current market price. We estimate revenues of $40.8 billion in CY14 against consensus estimates of $39.6 billion . We estimate non-GAAP EPS of $3.25 for fiscal year 2015 (ends May 2015) compared to consensus estimates of $3.04 from Oracle.

Salesforce.com

Salesforce announced newer versions of its flagship Sales Cloud and Service Cloud offerings on October 07. Additionally, the company announced dates for its annual Dreamforce conference from October 12-16 to be held in San Francisco. Salesforce has included a financial analyst meeting at Dreamforce, which should be helpful in providing some insights into the financial implications of any new product launches scheduled for Dreamforce. Last time around, the company announced a new mobile-first Salesforce1 platform at Dreamforce 2013. So far in FY15, the Salesforce1 platform has generated about $346 million in revenues and has a fiscal year revenue run-rate of nearly $700 million. We expect the platform to become a multi-billion contributor to Salesforce in the long run.

Shares of Salesforce have declined marginally through the week but have been quite volatile this year. We have a $55 price estimate for Salesforce, marginally higher than its current market price. We estimate revenues of $5.25 billion in FY15 against consensus estimates of $5.37 billion . We estimate non-GAAP EPS of $0.57 in FY15 compared to consensus estimates of $0.51 from Salesforce.

SAP SE

The German enterprise software major fell the most this week amongst the four companies under review. Shares of SAP SE contracted more than 5% intra-day on Wednesday and slipped to their 52-week in trade after a report from Boerse Online indicated that the company had missed its pipeline targets at quarter-end. Other reports suggested a hiring freeze until 2014 end to maintain cost discipline and meet year-end earnings targets. Additionally, the weakening economic outlook  in the European Union is expected to weigh on SAP’s upcoming quarterly results. Recent economic data for August 2014 indicates that industrial production activity across the Eurozone has declined faster than anticipated, sparking a sell-off in European equities.

We will be reviewing our $96 price estimate for SAP SE after the company reports its third quarter results on October 20. We estimate revenues of $23.7 billion (~€17.3 billion) from SAP in 2014, compared to a consensus estimate of €17.52 billion. We also have a non-IFRS earnings per share estimate of $5.18 (~€3.78) for fiscal year 2015 compared to consensus earnings estimates of €3.42.

Symantec Corp.

Shares of Symantec Corp. were the best performer among the four stocks, supported by a Bloomberg report on Tuesday indicating that the company might be looking to split itself into two separate entities. Symantec issued an official press statement on October 09 highlighting its strategy to separate the security and storage software product lines to unlock greater value for shareholders and have better management control.

Shares of Symantec have posted marginal gains through the week. We have a $25 price estimate for Symantec, about 5% higher than its current market price. We estimate revenues of $6.80 billion in CY14 against consensus estimates of $6.72 billion for FY15 (ending March 2015). We estimate non-GAAP EPS of $1.98 in FY15 from Symantec compared to consensus estimates of $1.88.

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