Oracle stock price has pulled back in the past few months, moving from the year-to-date high of $345 in September to $217 today. This crash has led to a big wipeout as its market cap has dropped from $934 billion to the current $620 billion. This ORCL stock forecast explores what to expect ahead of this week’s earnings.
Oracle stock has crashed as risks rise
The ORCL stock price has pulled back in the past few months, erasing most of the gains it made after reporting the last financial results in September.
That report was excellent as it showed that the company’s Remaining Performance Obligations (RPO) rose by 359% to $455 billion, one of the best figures in the tech industry.
Most of this RPO was because of its evolution from a big company in the database industry into a major provider of solutions in the artificial intelligence sector.
This deal culminated in the $300 billion partnership with OpenAI in a five-year period. It also included some elements of the Project Stargate, which also involves Softbank.
Oracle stock price has crashed in the past few months as investors remain concerned about OpenAI’s dealmaking, which now involves partnerships worth over $1.3 trillion. In a recent report, HSBC warned that the company will not be profitable until 2030 and that it will need to raise over $200 billion in assets.
The results also showed that its revenue rose by 12% in the first quarter to $14.9 billion, with its cloud revenue soaring by 28% to $7’2 billion. In her statement, the CEO said:
“It was an astonishing quarter—and demand for Oracle Cloud Infrastructure continues to build. Over the next few months, we expect to sign up several additional multi-billion-dollar customers, and RPO is likely to exceed half a trillion dollars.”
Therefore, the upcoming results will provide more color on whether the company continued experiencing this growth in terms of RPOs.
The Oracle stock price has also come under pressure after a report by The Information cited internal officers who were concerned about its margins, claims that the company refuted.
Additionally, Oracle’s bond yields have jumped after the company borrowed heavily to finance its AI data center build up. It borrowed over $18 billion recently, bringing its total debt to over $100 billion. Indeed, its bond yields have jumped as concerns about its business remain.
Oracle earnings ahead
The next important catalyst for the Oracle stock price will be its earnings, which will come out later this week.
Analysts expect the numbers to show that the revenue rose by 15% to $16.20 billion in the last quarter, continuing a prolonged period of double-digit revenue growth.
The guidance is expected to show that the company will make $16.87 billion in the next quarter, a 20% annual increase.
Oracle’s earnings per share are expected to keep rising, moving to $1.64 in the last quarter from $1.47 in the same period last year. Still, Oracle has missed three of the last four estimates, meaning that the trend may continue this quarter.
Another major headwind for the Oracle stock price is that the company is highly overvalued, with its forward price-to-earnings ratio rising to 44.43, up from the five-year average of 30.
ORCL stock price technical analysis
The daily timeframe chart shows that the Oracle stock price has slumped in the past few months, moving from a high of $345 in September to the current $220.
This crash happened as the company’s risks continued growing, especially because of its partnership with OpenAI and as investors remained concerned about the AI bubble.
On the positive side, the stock has formed a morning star candlestick pattern, which is a common bullish reversal sign. This candle is made up of a small body and higher and lower shadows.
It has also remained above the 50-week and 100-week Exponential Moving Averages (EMA). Therefore, with so much pessimism being priced in, there is a likelihood that the stock will rebound after earnings, and possibly move to the resistance level at $250.
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