Is it possible to draw parallels between Oracle Corp. (ORCL) and the New York Jets? According to one analyst, the software company’s weak forecast has left investors feeling just as disappointed as football fans after a disappointing game.
Prior to Oracle’s earnings report, there was a great deal of anticipation and excitement, notes Jordan Klein, a desk-based analyst at Mizuho. However, despite shares surging by 12% in the ten days leading up to the announcement, Wall Street was hoping for a revenue forecast that exceeded expectations.
While Oracle’s lackluster outlook can be attributed to revenue challenges within its healthcare-software business, Cerner, Klein believes that the company’s highly anticipated CloudWorld 23 event next week has been overshadowed by this downbeat forecast.
In order to illustrate his point, Klein compares Oracle to the New York Jets. Fans were incredibly excited about the team’s prospects for the season, particularly with the talented Aaron Rodgers leading them, and it seemed like they had the potential to make it far in the playoffs. However, Rodgers sustained a debilitating Achilles injury after just four snaps in the Jets’ opening game on Monday night.
Following the discouraging news, Oracle’s shares plummeted by 12.9% during morning trading on Tuesday, marking its most significant single-day decline since March 4, 2002, when they fell by 14.5%.
Brian White, an analyst at Monness, Crespi, Hardt & Co., downgraded Oracle’s stock from buy to neutral in light of the report.
Oracle: A High-Quality Tech Company with Cloud Transformation Opportunity
Oracle, a leading tech company, has been viewed as a high-quality player in the industry with immense potential for cloud transformation. However, recent developments have led to a less compelling valuation, overly optimistic sentiment, and rocky trends at Cerner. Experts believe that the darkest days of this downturn are still ahead.
Analysts have noted a disturbingly peculiar vibe from Oracle’s earnings call, indicating a shift in management’s confidence in their messaging. While the company continues to showcase strong momentum in AI development, including $4 billion in signed contracts, issues such as a more aggressive cloud transition at Cerner are expected to limit growth.
Kirk Materne from Evercore ISI takes a more forgiving stance, suggesting that the selloff is primarily due to expectations getting ahead of themselves rather than any major surprises in the fiscal first-quarter report. Despite this, Materne maintains an in-line rating on the stock while increasing the price target to $131 from $125.
On the other hand, Guggenheim analyst John DiFucci expresses a bullish view on Oracle. He believes that the three pillars of growth, namely software-as-a-service, Oracle Cloud Infrastructure, and on-premises database migration to the cloud, still have significant potential for further development. DiFucci assigns a buy rating to the stock, with a target price of $150.
Overall, Oracle’s position in the tech industry presents both challenges and opportunities. While concerns exist regarding valuation and confidence, experts recognize the company’s potential for cloud transformation and sustained growth.
