01:10 PM EDT, 09/10/2024 (MT Newswires) -- Oracle (ORCL) continued to benefit from cloud momentum in the fiscal first quarter but an "aggressive" ramp in the second half may be required to achieve management's full-year revenue guidance following a below-expected top-line guide for the second quarter, BofA Securities said.

The brokerage raised its price target on the stock to $175 from $155 and reiterated a neutral rating in a note emailed Tuesday. Shares of Oracle were gaining 12% in Tuesday trade after the software maker reported stronger-than-expected results for the first quarter late Monday.

Among the positives was an acceleration in the annual growth of total remaining performance obligations -- future commitments arising from contractual relationships -- to 53% from 44% in the fourth quarter due to larger cloud migration deals, BofA said. However, current RPO growth decelerated to 18% from 33%, suggesting that RPO in the first quarter benefitted from duration and some larger Oracle database migration deals, according to the research report.

A three percentage-point year-over-year acceleration in Oracle cloud infrastructure currency-neutral revenue growth to 46% indicates "solid execution on migration deals," though the segment had an easier comparison, BofA analyst Brad Sills said.

Oracle's fiscal second-quarter constant-currency revenue growth guidance of 8% at the midpoint was below BofA's 9% expectations. This likely requires Oracle to make up ground in the second half of the year to reach its full-year double-digit revenue growth guidance, the report showed.

Chief Executive Safra Catz told analysts on a conference call late Monday that the company remains "very confident and committed" to achieving its fiscal 2025 revenue growth target, according to a Capital IQ transcript. BofA is estimating third- and fourth-quarter sequential revenue growth rates of 10% and 12%, respectively, compared with normal seasonality of 8% and 12%.

Significantly higher capital expenditures, which were up about 50% in the first quarter, could weigh on margins, according to Sills. "A CapEx ramp of this magnitude sets the hurdle for margin expansion significantly higher from here," he said.

BofA reduced Oracle's 2025 earnings per share target to $6.26 from $6.31, putting the brokerage below the $6.30 Bloomberg consensus. It also reduced EPS estimates for 2026 and 2027.

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