Oracle Corporation’s Current Market Challenges and Future Outlook

Austin, Texas-based Oracle Corporation (ORCL) specializes in products and services geared toward enterprise information technology environments. With a market capitalization of $482.4 billion, Oracle is a key player in offering cloud solutions and services that facilitate various cloud deployment models.

Traditionally, companies with market values of $200 billion or more are classified as “mega-cap” stocks, and Oracle qualifies with a market cap well above this benchmark. The company is especially known for its widely-used Oracle Database, a powerful database management system (DBMS) favored by large enterprises for data storage and management.

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At present, Oracle is trading 16.9% below its 52-week high of $198.31, which was reached on December 9. In addition, Oracle shares have dropped 9.8% over the past three months, trailing the iShares Expanded Tech-Software Sector ETF (IGV), which reported a 7.6% decrease during the same period.

However, looking at a longer time frame, ORCL has shown resilience with a 47.9% increase over the past 52 weeks, significantly outperforming the IGV’s 12.6% return. Over six months, Oracle shares have grown 19%, again surpassing IGV’s 11.6% gains.

Confirming its recent bearish trend, ORCL has been trading below its 50-day moving average since late February; nevertheless, it has consistently remained above its 200-day moving average since early March 2024.

Oracle’s recent challenges can largely be linked to a slowdown in the growth of its cloud application sales and some uncertainty concerning investment returns. For example, although Oracle’s cloud services and license support revenues rose by 12% to $10.8 billion in Q2, analysts viewed this increase as insufficient given the company’s hefty investments in cloud infrastructure.

Following the release of its Q2 earnings on December 9, ORCL shares fell by 6.7%. The company reported non-GAAP earnings of $1.47 per share, alongside revenues of $14.1 billion, which fell short of expectations. Despite this, Oracle’s bottom line increased by 9.7% year-over-year, and revenue grew by 9%, propelled by ongoing momentum in its Oracle Cloud Infrastructure (OCI) segment.

In terms of performance relative to competitors, Oracle has notably outperformed Adobe Inc. (ADBE), which has seen a decline of 20.9% over the past 52 weeks and 23% over the last six months.

Looking ahead, analysts maintain a cautiously positive outlook for Oracle. It holds a consensus rating of “Moderate Buy” from 33 analysts, with a mean price target of $195.03, implying a potential upside of 18.4% from its current trading levels.

On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.