(Reuters) – Oracle fell 9% on Tuesday, as a weak forecast came amid stiff competition in the cloud-computing industry and a rebound in digital spending weighing on revenue growth.
The company was on track to lose nearly $30 billion in market value, based on a premarket share price of $115.
The stock is up 55% this year on optimism that the rise of generative AI will increase demand for the cloud. Lower-than-expected revenue for the first quarter and lower estimates for the second, however, indicated that the AI stimulus will take longer to materialize.
Oracle, known for its database software, is playing catch-up with cloud majors such as Amazon Web Services, Microsoft’s Azure and Alphabet’s Google Cloud at a time when businesses are dialing back technology spending over concerns about the economy.
CEO Safra Catz also warned of weakness in near-term revenue growth at Cerner’s health records business, which Oracle bought last year for $28.3 billion. The company is moving on-premises customers from upfront license purchases to the cloud.
“We continue to believe that high single-digit growth may be unsustainable for Oracle,” D Davidson analyst Gil Luria said, lowering his price target on the stock to $105.
Most analysts, however, were bullish on the company and attributed the decline in stock prices to Oracle’s rally heading into earnings.
Barclays analysts said: “Equities have been very high recently, so Q1 doesn’t look like a short-term motivator. But they highlighted strong delayed earnings, AI backlog commentary and some positive signs in the cloud business as positive highlights.”
At least 14 brokerages raised their price targets on the stock, pushing the median view to $133, according to LSEG data. This is about 5% higher than the company’s last closing price.
Oracle has a forward 12-month price-to-earnings ratio of 21.78, compared to the industry median of 15.42.
(Reporting by Aditya Soni in Bengaluru; Editing by Krishna Chandra Elluri)
