Possibility of Oracle Shares Dropping to $110?
In a nutshell, Oracle (ORCL) recently unveiled its third-quarter results for the Feb 2025 period, showing earnings of $1.47 per share on revenue of $14.13 billion. This is a 6% increase in sales and a 4% growth in earnings compared to last year. Despite exceeding expectations on some fronts, the company fell short of Wall Street's anticipation of $1.49 per share on sales of $14.39 billion.
Despite those missed projections, Oracle showed impressive strength with a 62% increase in its remaining performance obligations and a 49% boost in its cloud infrastructure business due to increased AI demand. However, concerns loomed as the company projected revenue growth between 8-10%, below analyst estimates of 11%, and a lower earnings projection of $1.61 to $1.65 per share compared to the anticipated $1.79 per share.
Downturns pose a risk, and ORCL stock could potentially drop to $110 per share in an economic downturn. During previous downturns, ORCL faced declines of up to 40% in just a few quarters, but it has managed to recover fully in most instances.
While the surge in Oracle's cloud infrastructure business offers promising growth, macroeconomic factors need consideration. Though inflation anxieties have eased, they persist due to the current administration's aggressive tariff and immigration policies. Geopolitical instability stemming from the new administration's policy initiatives creates additional challenges, including conflicts in Ukraine-Russia, trade uncertainties, and strained relations with allies like Canada, Mexico, and Europe.
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Facing a volatile market, investors might want to reconsider their attachment to ORCL stock. With a premium valuation of 24x forward earnings compared to its four-year average price-to-earnings ratio of 20x, holding onto ORCL stock in a downturn could prove challenging. Investors may want to be prepared for a potential drop in ORCL stock price, and having a well-diversified portfolio like the High-Quality Portfolio could offer a safer bet during turbulent times.
- Despite exceeding expectations in some areas, Oracle's projected revenue growth for 2025 falls below analyst estimates, potentially straining the company's earnings.
- In light of the strained global economic environment in 2025, with factors such as inflation anxieties, geopolitical instability, and trade uncertainties, investors might find the high-risk ORCL stock challenging to hold onto during a potential downturn.
- As ORCL stock carries a premium valuation of 24x forward earnings, compared to its historical average of 20x, investors may need to reconsider their attachment and consider a well-diversified portfolio like the High-Quality Portfolio for potentially safer returns during turbulent times.
