Oracle Shares Slump As Earnings Guidance Misses Estimates

Oracle Corporation shares slumped about 5% in extended trading on Tuesday after the world’s largest database management company called for a lower earnings outlook for the fiscal first quarter than equity analysts had previously expected.

The Austin, Texas-based computer technology corporation reported earnings per share of $1.54 per share, beating analysts’ expectations of $1.31 per share. The company’s revenue came in at $11.23 billion, topping the Wall Street consensus estimates of $11.04 billion.

According to CNBC, Oracle CEO Safra Catz called for $0.94 to $0.98 in adjusted earnings per share and 3% to 5% revenue growth in the fiscal first quarter, lower than the market expectations of $1.03 per share.

Oracle Corporation shares slumped about 5% to $77.75 in extended trading on Tuesday. The stock rose over 26% so far this year.

Analyst Comments

“Strong momentum in back-office apps and a pick-up in bookings growth gives management confidence to increase investment ahead of a potential acceleration in revenue growth. However, investors likely need more evidence in the numbers before pushing multiples higher, leaving share range-bound,” noted Keith Weiss, equity analyst at Morgan Stanley.

Oracle Stock Price Forecast

Ten analysts who offered stock ratings for Oracle in the last three months forecast the average price in 12 months of $76.10 with a high forecast of $93.00 and a low forecast of $54.00.

The average price target represents a -6.79% from the last price of $81.64. Of those 10 analysts, two rated “Buy”, eight rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $77 from $73 with a high of $90 under a bull scenario and $58 under the worst-case scenario. The firm gave an “Equal-weight” rating on the database management company’s stock.

Oracle’s current low valuation at ~16.7x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” Morgan Stanley’s Weiss added.

“With management guiding to mid-single-digit CC revenue growth in a software sector filled with strong secular growth stories, and operating margins declining in FY22 due to heightened investment in Cloud, we remain Equal-weight while our price target moves up to $77.”

Several other analysts have also updated their stock outlook. Jefferies assumed coverage with hold rating and raised the target price to $80 from $75. JP Morgan lifted the target price to $77 from $73. Barclays increased the target price to $83 from $80. Piper Sandler increased the target price to $80 from $57.

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