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Why Several Analysts Have Downgraded Oracle Stock

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Oracle stock downgrades

So far in the series, we have discussed Oracle’s (ORCL) copyright win against Google (GOOG) and its consistent dominance in the database space, which is further augmented by its Oracle Autonomous Database. Despite several initiatives, Oracle’s transition to the cloud has not satisfied market participants, which is evident from several downgrades and price cuts.

After Oracle’s fiscal 3Q18 earnings, Monika Garg, an analyst at KeyBanc Capital, downgraded Oracle to “sector weight” from “overweight,” citing a slower-than-expected transition to the cloud as the reason behind the downgrade. She said, “Oracle’s transition to the cloud was a major factor in our July 2017 upgrade, but is taking much longer to play out.” She said implementation risk in the cloud for Oracle has now increased as Amazon (AMZN), Microsoft (MSFT), Google (GOOG), and other cloud players are growing fast. Please read, Assessing Oracle’s Ability to Compete in the Cloud Space to know more.
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Brad Reback, an analyst with Stifel Nicolaus, also cut the firm’s rating on Oracle to “hold” from “buy.” In a research note to clients, Reback wrote, “We find the lackluster results/guidance concerning, especially in contrast to the strong results posted by Microsoft, Adobe, Workday, ServiceNow, Splunk, Nutanix, etc. driven by one of the best software spending environments we have seen since picking up coverage of the space in 2001.”

Oracle stock had its worst fall in last five years

On March 20, 2018, Oracle stock fell sharply owing to lackluster growth in its cloud-software business, which prompted some industry analysts to downgrade the stock. It fell 9.0%, which made it the “biggest percentage decliner in the S&P 500 Index.” Within ten days, Oracle stock lost more than 11%. On March 9, 2018, Oracle stock closed at $52.97 and went down to $47.05 on March 20. Since then it has been falling and is currently trading at ~$45 price levels. On March 20, the stock hit its largest single-day percentage fall since June 2013.

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