Margins, and selling the news: analysts look to explain Oracle’s tumble
The somewhat counterintuitive tumble in Oracle shares continued into afternoon trading Friday, despite Wall Street analysts’ more or less favorable reaction to Oracle’s investor day presentation Thursday, where executives said the company’s AI cloud business would eventually sport margins of between 30% and 40%, far better than the figures reported by The Information back on September 7.
And yet, the stock is on its way to its worst day in the last six months. What gives?
Gil Lauria, who covers Oracle for D.A. Davidson & Co. — who has it at “hold” with a $300 price target — has a theory, telling Sherwood News:
“Investors are disappointed that the entire growth acceleration in Oracle is from the Oracle Cloud Infrastructure business, and that Oracle expects the rest of the business to grow low single digits.
The other disappointment came from Oracle acknowledging that the GPU rental business only had 30-40% gross margins, far lower than the 80% gross margins for the rest of the business.”
Other analysts we’ve chatted with on background say they’re not convinced the margin story is the source of today’s slump, suggesting the also plausible explanation that the drop might just be a sign traders bought the stock ahead of the presentation to analysts on Thursday anticipating positive announcements, and now they’re selling simply selling the news.
Gil Lauria, who covers Oracle for D.A. Davidson & Co. — who has it at “hold” with a $300 price target — has a theory, telling Sherwood News:
“Investors are disappointed that the entire growth acceleration in Oracle is from the Oracle Cloud Infrastructure business, and that Oracle expects the rest of the business to grow low single digits.
The other disappointment came from Oracle acknowledging that the GPU rental business only had 30-40% gross margins, far lower than the 80% gross margins for the rest of the business.”
Other analysts we’ve chatted with on background say they’re not convinced the margin story is the source of today’s slump, suggesting the also plausible explanation that the drop might just be a sign traders bought the stock ahead of the presentation to analysts on Thursday anticipating positive announcements, and now they’re selling simply selling the news.
