Shares of Oracle (NYSE:ORCL) — which focuses on cloud databases and software applications — are suffering heavy losses today amid disappointing earnings results. In addition, management disclosed soft revenue guidance for the current quarter. For now, institutional investors are betting big on ORCL stock. Moving forward, however, the latest financial disclosure presents some wrinkles that retail market participants should acknowledge.
According to CNBC, Oracle posted EPS of $1.19 during its fiscal first quarter. This figure exceeded analysts’ EPS target of $1.15 per share. However, on the top line, the tech giant missed slightly as well, ringing up $12.45 billion in sales versus the $12.47 billion that Wall Street experts had anticipated.
Adding questions to ORCL stock, the company also guided for fiscal Q2 adjusted net income of between $1.30 and $1.34 per share. Management anticipates from 5% to 7% revenue growth during the period as well. According to CNBC, analysts polled by LSEG “had predicted $1.33 in adjusted earnings per share and $13.28 billion in revenue, which implies 8% revenue growth.”
In June 2022, Oracle closed its $28.2 billion acquisition of electronic health record software firm Cerner. Because management says that Cerner is part of an “accelerated transition” to the cloud, the process apparently slowed down revenue growth.
Institutional Investors Bet on ORCL Stock But Questions Rise
Fundamentally, the directive underlying ORCL stock centers on expanding Oracle’s cloud infrastructure business. To compete with the likes of Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), the tech specialist has to scale its cloud enterprise, at least according to CFRA analyst Angelo Zino.
To that end, Oracle Chairman Larry Ellison has expressed optimism for growing demand, thanks in large part to artificial intelligence (AI). According to Ellison, companies have “signed contracts to purchase more than $4 billion of capacity” from Oracle’s cloud service — a figure that’s twice what the company booked at the end of fiscal Q4.
As of June 29, here are the top institutional holders of ORCL stock:
- Vanguard Group: 139.38 million shares equating to $15.31 billion.
- BlackRock (NYSE:BLK): 120.62 million shares equating to $13.25 billion.
- State Street (NYSE:STT): 63.51 million shares equating to $6.97 billion.
- JPMorgan Chase (NYSE:JPM): 34.10 million shares equating to $3.74 billion.
- FMR: 33.50 million shares equating to $3.68 billion.
Still, circumstances may change. According to Fintel’s options flow screener — which filters for big block trades likely made by institutions — the latest major transactions in the derivatives market stem from sold calls at various strike prices and at near-expiry and longer-expiry dates.
Why It Matters
According to TipRanks, the current consensus view for ORCL stock comes in as a moderate buy. However, this assessment is rather mixed, breaking down as 11 buy ratings and nine holds. Overall, the average price target for shares lands at $134.85, implying about 22% upside potential.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
