Legal Settlement And Expanded Services Will Unlock Market Potential

Key Takeaways

• Legal resolution with Oracle unlocks new markets and accelerates customer growth, supporting higher revenue and bookings.
  
• Expanded service offerings and strategic partnerships strengthen recurring revenue streams and position the company for sustainable, diversified growth.
  
• Heavy reliance on declining legacy ERP support, coupled with slow cloud adoption and adverse market forces, threatens future growth, revenue stability, and market relevance.

Catalysts

Provides enterprise software products, services, and support.

• The recent legal settlement with Oracle ends a 15+ year litigation overhang, removing a key barrier to customer acquisition and partnership expansion-unlocking previously inaccessible market segments and accelerating sales pipeline growth, likely resulting in increased revenue and improved bookings growth in future periods.
  
• Rimini Street's expanded service offerings-including the new support pillar for VMware and custom/bespoke support for a broader set of enterprise and homegrown software-position the company to capture a larger share of IT budgets as enterprises pursue digital transformation and cost optimization, positively impacting top-line revenue growth.
  
• Strategic partnerships (e.g., ServiceNow, Merlin Cyber, Dayforce) and investments in channel initiatives are expected to accelerate market penetration, especially in public sector, SaaS, and global accounts, diversifying the customer base and supporting more sustainable, recurring revenue streams.
  
• Operational efficiency improvements-including service delivery automation, packaged service offerings, and targeted cost optimization-have driven higher gross margins (surpassing 60%) and are likely to further improve net margins and EBITDA as revenue grows and the cost-to-serve continues to decrease.
  
• The increasing trend among enterprises to extend the lifecycle of their existing ERP systems, favoring "Smart Path" approaches over costly migrations, aligns with Rimini Street's core value proposition and is expected to drive additional demand for long-tail support and optimization services, supporting stable or growing recurring revenues and earnings over the long term.

Rimini Street Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Rimini Street's revenue will grow by 1.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.7% today to 21.0% in 3 years time.
• Analysts expect earnings to reach $93.8 million (and earnings per share of $0.97) by about August 2028, up from $-2.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.9x on those 2028 earnings, up from -132.9x today. This future PE is lower than the current PE for the US Software industry at 36.5x.
• Analysts expect the number of shares outstanding to grow by 1.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.26%, as per the Simply Wall St company report.

Rimini Street Future Earnings Per Share Growth

Risks

• The required wind-down of Rimini Street's support for Oracle PeopleSoft by July 2028 as part of its litigation settlement directly removes a meaningful and historically stable revenue stream (currently 6% of total revenue and declining) and could compress total revenue and billings over the next several years, challenging sustainable top-line growth.
  
• As clients accelerate migration from legacy, on-premises ERP systems (such as Oracle and SAP, which form the core of Rimini Street's business) to cloud-native and SaaS-based solutions, the long-term addressable market for third-party support on legacy systems will likely shrink, threatening recurring revenue and growth prospects.
  
• Industry consolidation and increasing direct vendor influence-such as Oracle and SAP aggressively pushing bundled cloud offerings and restricting access to third-party maintenance through tightened licensing and lock-in tactics-could erode Rimini Street's client base, drive higher churn, and weaken revenue visibility.
  
• Despite new partnership announcements and diversification efforts (e.g., ServiceNow, Dayforce), Rimini Street's relatively slow ramp-up in cloud/SaaS support offerings and reliance on legacy ERP systems present a risk that the company will lag secular shifts in IT spending, resulting in missed growth opportunities or declining market relevance, with negative impacts on long-term revenues.
  
• Prolonged macroeconomic uncertainty (e.g., tariff instability, sectoral disruptions from deglobalization, and cautious public sector/federal spending) may lengthen sales cycles, elevate sales and marketing costs as a percentage of revenue, and limit near-term expansion, thus putting pressure on net margins and earnings growth.

Valuation

• The analysts have a consensus price target of $6.625 for Rimini Street based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $446.1 million, earnings will come to $93.8 million, and it would be trading on a PE ratio of 8.9x, assuming you use a discount rate of 9.3%.
  
• Given the current share price of $4.07, the analyst price target of $6.62 is 38.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.