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Why Did Macquarie Research Downgrade Oracle Stock?


Jun. 18 2019, Updated 11:58 a.m. ET

Oracle gets a rating downgrade

Oracle (ORCL) stock has been downgraded by Macquarie Research from an “outperform” to a “neutral” rating, as Macquarie reportedly believes that the software giant is “underinvesting in its future.” The stock fell ~1% in premarket trading on June 18.

Oracle stock was down 0.3% on June 17 and closed at $53.13. The stock has returned nearly 19% year-to-date as of June 17 compared to the S&P 500’s return of 15.3% in the same period.

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Oracle’s weak revenue growth

Oracle has been seeing slowing revenue growth for the past six consecutive quarters due to currency headwinds and consistent weakness in the Cloud License and On-Premise License segment. In its last-reported quarter, Oracle’s revenue fell 0.7% YoY (year-over-year), hurt by currency headwinds. The company expects currency headwinds to continue to dent its fiscal 2019 fourth-quarter revenue by -3%. It expects its revenue in the quarter to be flat to down 2% YoY.

The company’s Cloud License and On-Premise License segment’s revenue fell 4% YoY in the third quarter of fiscal 2019, while its hardware revenue fell 8% YoY, and its Services revenue, which doesn’t include its cloud services and software revenue, fell 1% YoY in the quarter.

Though Oracle is aggressively investing in the expansion of its cloud services amid companies’ increasing shift to cloud computing from traditional on-premises setups, the company is still lagging behind established software companies such as Workday and Microsoft. Workday expects its cloud subscription revenue to grow 27%–28% in fiscal 2020, which ends in January 2020.


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