Weekly Software Notes: Oracle, Salesforce and SAP SE
The software industry had a mostly quiet week ended January 9. Oracle (NYSE: ORCL) and Salesforce (NYSE: CRM) remained nearly flat throughout the week. On the other hand, SAP SE (NYSE: SAP) had a turbulent week due to sustained selling pressure and closed the week down by 6%. Both the Dow Jones US Software Index and the broader S&P 500 remained flat Monday through Thursday.
In this report, we present the key updates in the software industry during the week ended January 9.
Oracle
Oracle’s shares fell by 2% on January 5 and by 1% the next day, after the company went ex-dividend on January 2. Its shares recovered slightly on January 8 to close the week down by 2% Monday through Thursday. Oracle will pay a dividend of $0.12 per share on January 28, marking the 7th consecutive quarter of unchanged dividend.
The company’s stock had touched a 52-week high of $46.71 on December 24. Oracle insiders took advantage of the near record-high stock prices and sold over 3 million shares amounting to more than $100 million, during December 15th and 31st. The insider sales included a planned sale of the entire stake held by Oracle’s Vice Chairman, Jeffrey O. Henley.
The sales by company insiders dampened investor sentiment and effectively negated the positive reception of the Datalogix acquisition (Read: Oracle Acquires Datalogix, Strengthens Presence in Cloud Advertising Business). The company’s share price has fallen by 5% since the acquisition, but is up 15% year to date due to strong second quarter earnings.
We have a price estimate of about $47 for Oracle, which is approximately 7% higher than the current market price.
Check out our complete analysis of Oracle here.
[trefis_slideshow ticker=”ORCL” rhs=”03″]
Salesforce
Salesforce shares fell by 2% on January 5th and 6th, but recovered on January 8 by 3%. Its shares closed at $58.59 on January 8th and ended the week down by 1% Monday through Thursday.
Salesforce’s recent months have been characterized by heavy and sustained insider selling. Last week alone, CEO Marc Benioff sold 62,500 shares in two transactions on Monday and Wednesday. Insider sales have been a matter of some concern for Salesforce investors, given that company insiders sold more than 3.5 million shares in calendar 2014, raking in over $200 million in the process. Nearly three-fourth of these shares were sold by Mr. Benioff, who has a long track record of selling company stock.
Meanwhile, Salesforce is reportedly moving ahead with a planned expansion in Atlanta. [1] The company plans to expand its regional hub in Atlanta by taking 50,000 square feet office space to cater to 300 new employees.
We have a price estimate of about $55 for Salesforce, which is approximately 6% lower than the current market price.
Check out our complete analysis of Salesforce here.
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SAP
SAP had a rough week on the bourse and fell 4% on January 5. The stock continued to fall over the next two days but recovered by 2% on January 8 to close at $66.13. The share price was down by 6% Monday through Thursday and has fallen by a drastic 21% year to date.
SAP is one of the many European companies hammered by a weakening Euro. Euro, which is currently trading at $1.19, has fallen to its lowest since March 2006 over plunging oil prices and the economic turmoil in Greece. The company’s financial performance has also suffered and it missed 2014 third quarter estimates (Read: SAP Lowers FY14 Profit Guidance on Faster Cloud Expansion). Higher costs associated with faster expansion in cloud have taken a toll on the company’s margins; although the company has performed marginally better than consensus estimates on the revenue front.
We expect the margins to remain under pressure over the short term due to investments in sales and marketing cloud. However, we believe that in the long term, margins will benefit from rapidly accelerating revenues from the strengthened cloud business.
Check out our complete analysis of SAP here.
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- Salesforce moves forward on Buckhead office expansion; could add 300 jobs, BizJournals, January 5, 2015 [↩]