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Oracle (NYSE:ORCL) fell more than 3% in mid-day trading on Friday after the IT giant reported fiscal third-quarter sales and an outlook that investment firm Societe General said were “less dynamic” than they had been previously.
Analyst Richard Nguyen lowered the firm’s rating on Oracle (ORCL) to hold from buy, noting that while the company’s fundamentals strong, its valuation has made the stock less attractive.
“While Oracle continues to scale up its cloud business, its top-line growth momentum may start to slow, in our view,” Nguyen wrote in an investor note.
Looking ahead, Oracle (ORCL) expects earnings, excluding one-time items, to be between $1.56 and $1.60 a share and revenue to grow between 15% and 17% year-over-year to be between $13.62B and $13.85B.
Oracle (ORCL) reported a third-quarter profit of $1.22 a share, excluding one-time items, on revenue of $12.4B. Wall Street analysts had forecast Oracle to earn $1.20 a share, on $12.42B for the quarter that ended February 28.
Nguyen raised his fiscal 2023 and 2024 earnings estimates after the report, but noted that the investment case for Oracle (ORCL) “relies on two engines” – the company’s ability to sustain revenue growth and a “rapidly” improving operating margin.
“Although the second engine is strong (supported by management’s excellent track-record), the first engine appears to be slowing now, limiting further short-term upside, in our view.”
Separately on Friday, a number of Wall Street analysts weighed in on Oracle’s (ORCL) results, including one that described it as “in-between.”
Analysts are mostly cautious on Oracle (ORCL). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Additionally, Seeking Alpha’s quant system, which consistently beats the market, rates ORCL a HOLD.
