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rewrite this title Oracle Stock Sinks 14% On Lackluster Earnings


Sep 12, 2023

Oracle (ORCL) experienced a significant drop in its stock price on Tuesday following its disappointing first-quarter results and revenue guidance that fell short of expectations. The stock fell by over 13%, with one analyst attributing this market response to “expectations getting ahead of themselves.”

In the first quarter, Oracle’s adjusted earnings rose by 16% year over year to $1.19 per share, while revenue increased by 9% to $12.45 billion. However, analysts had anticipated adjusted earnings of $1.15 per share on revenue of $12.45 billion.

During a call with analysts, Oracle’s CEO Safra Catz provided an outlook for the current quarter that was below analyst expectations. The company expects to earn $1.32 per share for the current quarter with a revenue growth of 6% within the company’s range.

As a result, Oracle stock dropped to 109.62, representing a 13.5% loss in the stock market. This decline also influenced similar stocks in the Computer Software-Database group, which fell by about 2%. However, despite this setback, the group is still up 52% for the year.

While Oracle’s cloud services revenue experienced a growth of 30% to $4.6 billion, its cloud license and on-premise license revenues declined by 10% to $800 million. Additionally, Oracle’s cloud infrastructure business saw a year over year revenue increase of 66% to $1.5 billion for the first quarter.

Leading up to the earnings report, Oracle’s stock had risen by 54.5% for the year following upgrades from UBS and Barclays, who emphasized the potential for artificial intelligence applications to drive demand for Oracle’s cloud businesses.

Despite the disappointing earnings report, some analysts remain positive about Oracle’s long-term prospects. Evercore ISI maintained an in-line rating for Oracle stock and raised its target price to 131 from 125. Barclays also maintained an overweight rating but lowered its target price for Oracle stock to 147 from 150.

Oracle’s acquisition of health-care data systems giant Cerner in 2022 for $28 billion is currently undergoing a transition into the cloud and recurring-revenue subscription model. This transition is causing temporary headwinds for revenue from the business.

Stifel analyst Brad Reback noted a 25% year over year decrease in capital expenditures for the quarter and expressed surprise at this decline given the positive comments from the company regarding customer demand and its existing AI backlog.

Despite the mixed results, ORCL shares were in a cup base with a 127.54 buy point, according to MarketSmith pattern recognition.

By Editor

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