Oracle (ORCL) Stock Down Over 5% in Pre-Market on Low Earnings Guidance Call

UTC by Steve Muchoki · 3 min read
Oracle (ORCL) Stock Down Over 5% in Pre-Market on Low Earnings Guidance Call
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Oracle reported a net income of $5.02 billion, or $1.68 a share, compared with $2.57 billion, or 79 cents a share, in the year-ago period.

Oracle Corp (NYSE: ORCL) stock closed yesterday trading at $72.12, 0.72% down. The drop intensified during Thursday’s premarket as the dip was approximately 5.44% at the time of writing.

The dip in Oracle stock is in contrast with the better than expected earnings results for the third fiscal quarter. Notably, Oracle reported a net income of $5.02 billion, or $1.68 a share, compared with $2.57 billion, or 79 cents a share, in the year-ago period. Besides, revenue rose to $10.09 billion from $9.8 billion in the year-ago quarter. According to a survey by FactSet, analysts expected Oracle to report earnings per share of $1.11 on revenue of $10.07 billion. The figures were advised based on the company’s forecast of $1.09 to $1.13 a share last quarter.

Oracle Stock and Its Market Outook

Notably, Oracle significantly benefited from the coronavirus pandemic as more demand for its tech-related services spiked. As a result, the subscription revenue experienced a sharp uptick, hence contributing approximately 72% of the total revenue.

“Subscription revenue now accounts for 72% of Oracle’s total revenues, and this highly-predictable recurring revenue stream, along with expense discipline, are enabling double-digit increases in non-GAAP earnings per share,” said Chief Executive Safra Catz in a statement.

However, the company further indicated that it expects activities to cool down in the coming quarters thus a low earnings guidance call. Catz told analysts on a conference call that she expects Oracle to report $1.20 to $1.24 in adjusted earnings per share and 5% to 7% revenue growth in the fiscal fourth quarter. According to a poll by Refinitiv, analysts had expected $1.28 in adjusted earnings per share and the equivalent of 4% revenue growth.

The lower-than-expected earnings guidance for the coming quarters triggered the sell-off. However, do not be deluded by today’s dip as Oracle stocks jumped over 81% last year. Besides, they have added approximately 11.49%, 21.25%, 15.02%, and 9.92% in the past two months, three months, one month, and five days respectively according to MarketWatch.

Despite the uncertainties caused by the coronavirus pandemic, Oracle is confident it will continue to grow in the coming years.

Larry Ellison, Oracle’s co-founder, chairman, and technology chief, said the company’s database software segment will spike significantly next year. “I’m not really ready to disclose our plans as to why I think it’s going to suddenly spike but we expect very, very rapid database growth next year,” he said.

Oracle has a reported market valuation of approximately $213.85 billion with 2.94 billion outstanding shares. A survey by MarketWatch indicates Oracle stocks received an average of Over rating from 27 ratings.

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Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies. Mythology is my mystery! "You cannot enslave a mind that knows itself. That values itself. That understands itself."

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