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The
company was on track to lose about $30 billion in market value,
based on its premarket share price of $115.
The stock has risen 55% this year on optimism the rise of
generative AI would drive up cloud demand. Lower-than-expected
revenue for the first quarter and a below-estimate forecast for
the second, however, signaled the boost from AI would take
longer to materialize.
Oracle, known for its database software, has been playing
catch-up with cloud majors such as Amazon Web Services,
Microsoft's Azure and Alphabet's Google Cloud at a time
businesses are dialing back tech spending over concerns about
the economy.
CEO Safra Catz also warned of near-term weakness in revenue
growth at the Cerner health records business, which Oracle
bought for $28.3 billion last year. The company is moving
customers in the unit to the cloud from license purchases that
are recognized upfront.
"We continue to believe high single-digit growth might be
unsustainable for Oracle given Cerner integration risks and
formidable data center competition," D.A. Davidson analyst Gil
Luria said, as he cut his price target on the stock to $105.
Most analysts, however, were positive on the company and
attributed the share price decline to Oracle's rally in the
run-up to earnings.
"Shares were already up a lot recently so Q1 doesn't look like a
short-term catalyst," Barclays analysts said. But they
highlighted strong deferred revenue, AI backlog commentary and
some positive signs in the cloud business as positives.
At least 14 brokerages raised their price targets on the stock,
pushing the median view to $133, according to LSEG data. That is
nearly 5% higher than the company's last closing price.
Oracle has a 12-month forward price-to-earnings ratio of 21.78,
compared with the industry median of 15.42.
(Reporting by Aditya Soni in Bengaluru; Editing by Krishna
Chandra Eluri)
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