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Oracle Stock Fell Due to Bad News in Its Q4 Results

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Oracle (NASDAQ:ORCL) stock fell nearly 5% in extended trading on Tuesday. The technology company posted its earnings for the fourth quarter of fiscal 2020, which ended May 31, after the markets closed. Oracle reported mixed results in the fourth quarter. Although the non-GAAP EPS beat analysts’ expectations, the sales were below the estimates.

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Oracle’s Q4 earnings results

In the fourth quarter, Oracle reported an adjusted EPS of $1.20 compared to $1.16 in the fourth quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $1.15 per share. Oracle generated sales of $10.44 billion—a reduction of 6.3% from the fourth quarter of fiscal 2019. The company missed analysts’ consensus sales estimate of $10.63 billion. The sales took a hit amid the COVID-19 pandemic.

In the fourth-quarter earnings release, Oracle CEO Safra Catz said, “Our overall business did remarkably well considering the pandemic, but our results would have been even better except for customers in the hardest-hit industries that we serve such as hospitality, retail, and transportation postponing some of their purchases.”

In the first quarter of fiscal 2021, Oracle expects its total revenues to be between $9.13 billion and $9.31 billion. The company expects its non-GAAP EPS to be between $0.84 and $0.88 for the first quarter.

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Wall Street analysts expect Oracle to report an adjusted EPS of $0.86 on revenue of $9.19 billion in the first quarter. Analysts also expect Oracle’s revenues to rise by 0.8% YoY (year-over-year) in fiscal 2021 to $39.37 billion. The sales could rise by 2.1% YoY in fiscal 2022 to $40.20 billion. The adjusted earnings will likely rise by 5.5% YoY in fiscal 2021 to $4.06 per share. However, the profits could rise by 8.6% YoY to $4.41 per share in fiscal 2022.

Analysts’ recommendations and target price

Among the 33 analysts following Oracle stock, ten recommend a “buy,” 19 recommend a “hold,” and four recommend a “sell.” Wall Street analysts have a 12-month target price of $52.50 for Oracle stock. Overall, the target price implies a downside potential of 3.8% compared to the stock’s closing price on Tuesday. The consensus target price for the stock has risen from $50.84 in May—a growth of 3.3%.

Many analysts revised their target price for Oracle stock after its fourth-quarter earnings report.

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  • RBC Capital increased its target price from $50 to $51.
  • Credit Suisse increased its target price from $57 to $58.
  • J.P. Morgan increased its target price from $55 to $57.
  • Citigroup increased its target price from $45 to $54.
  • Wedbush increased its target price from $52 to $54.
  • Stifel increased its target price from $44 to $48.
  • BMO increased its target price from $55 to $57.

Stock returns

Oracle stock rose 2.5% on Tuesday and ended the day at $54.59. At this closing price, the company’s market cap is $172.2 billion. Notably, the stock is trading 9.8% below its 52-week high of $60.50 and 37.5% above its 52-week low of $39.71. So far, the stock has risen by around 3.0% year-to-date.

Based on the closing price on Tuesday, Oracle stock was trading 2.6% above its 20-day moving average of $53.23. The stock is also trading 3.1% above its 50-day moving average of $52.93 and 5.5% above its 100-day moving average of $51.76. Oracle’s 14-day RSI (relative strength index) score is 57. When a stock’s RSI number is in the range of 30–70, it indicates that the stock isn’t oversold or overbought.

Oracle stock has a middle Band level of $53.23, while its lower Bollinger Band level is $51.42. On Tuesday, Oracle stock closed near its upper Bollinger Band level of $55.03, which indicates that it’s overbought.

Oracle’s board of directors also announced a quarterly cash dividend of $0.24 per share for its shareholders. The software company will pay its dividends on July 28 to shareholders on record as of July 15. Oracle has an annual dividend of $0.96 and a dividend yield of 1.76% as of Tuesday. Meanwhile, Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) also pay dividends regularly. They have yields of 1.05% and 5.21%, respectively.

On Tuesday, Microsoft and IBM stocks surged 2.5% and 2.9%, respectively. On the same day, the S&P 500 and the Dow Jones Industrial Average rose 1.9% and 2.0%, respectively. For more information, read US Stock Markets Might Crash amid Fears of Another COVID-19 Wave.

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