Oracle Reported Poor Earnings, but the Market Is Happy. Why?

Oracle
stock got an intensive boost after the software company released its financial
report for the fourth quarter of 2023. Interestingly, the Q4 results were worse
than expected. Let’s explore what impressed market participants and why Oracle
shares are trending this year.

First,
let’s examine the chart. It shows a massive spike after Oracle’s earnings
report.

Since
the beginning of 2024, Oracle’s stock has become even more attractive,
increasing by 35% in six months. This significant rise has also been flagged
by the stock screener, highlighting Oracle as a top performer in the
tech sector.

For
comparison, these gains are double those of tech giants Apple and Microsoft
(though Nvidia has outperformed everyone). Do you
regret not having Oracle in your portfolio?

Now,
let’s return to the financial report. Oracle’s earnings per share were $1.63,
down from the forecasted $1.65. Revenue was also lower than estimated – $14.29
billion vs. $14.55 billion.

Typically,
revenue and EPS are the key for market participants, but this time, they
focused on more trendy aspects, particularly artificial intelligence. Oracle’s
cloud infrastructure unit, which uses AI technologies, grew by 42% in the last
quarter compared to the previous year.

Oracle
officials are also sure that these stats will only increase in 2024.
Additionally, Oracle’s cloud solutions are distinguished by their comparatively
low prices.

Another
fact delighting investors is Oracle’s new contract with Microsoft and OpenAI.
Oracle’s Cloud Infrastructure will be used to extend the capacity for OpenAI,
and the company has seen high demand for training AI language models in the
Oracle Cloud.

Many
analyst firms have adjusted their forecasts and raised their target prices.
HSBC increased their target to $166 from $152, BofA Securities to $155 from
$144, UBS to $160 from $150, and Bernstein to $171 from $159. However, among
the firms that raised their forecasts, many target prices are still lower than
the current price. Therefore, you should do your own analysis before making any
trades.

This article was written by FL Contributors at www.forexlive.com.