Oracle: Citi Launches Coverage With Buy Rating, $32 Target

Citigroup analyst Walter Pritchard this morning picked up coverage of Oracle (ORCL) with a Buy rating and $32 price target.

“Oracle has uniquely driven industry-high margins across its base of software revenue vs. peers that rely on one or two products,” Prtitchard writes in a research note. “With incremental software margins in the 60%-70% range, we expect overall margins will continue to creep higher…this should continue to drive upside to Street estimates, where margin leverage has been systematically underestimated.”

Pritchard thinks Oracle can capture $1.7 billion in incremental operating income from the Sun acquisition in FY 2011, and $2.6 billion in FY 2012, above Oracle’s own targets. Pritchard sees Oracle earning $1.66 in FY 2010, up from $1.44 a year ago, and ahead of the Street at $1.62. For FY 2011, he sees $1.99, above the Street at $1.90. And for FY 2012, he projects $2.25 a share, again above the Street consensus, at $2.10.

Nonetheless, ORCL this morning is down 17 cents, or 0.6%, to $26.30.