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Oracle Stock Is Underperforming Amid Growth Uncertainty

Oracle Stock

Oracle (NYSE: ORCL) stock price underperformed in the past few months compared to the broader market index and industry peers. The bearish sentiments related to slow revenue growth is hindering the share price movement. The sluggish financial growth could also negatively impact its cash returns for investors. The company currently offers a quarterly dividend of $0.24 per share.

Oracle stock price is trading in the narrow range of $55 over the past couple of months. Lower than expected results for the latest quarter added to investor’s concerns. On the positive side, ORCL’s share price is trading at attractive valuations. Its price to earnings ratio of 14 is significantly low from the industry average of 20 times.

ORCL Oracle Corporation daily Stock Chart

Financial Performance is Hindering Oracle Stock Price Upside

The company has generated lower than expected results for the second quarter of 2019. Its revenue of $9.61 billion increased by only 0.5% from the year-ago period. Cloud Services and License Support revenues stood around $6.8 billion, while Cloud License and On-Premise License revenues came in at $1.1 billion.

The Q2 revenue is driven by robust growth from Fusion and NetSuite cloud applications businesses. Its Fusion ERP revenues increased 37% year over year while NetSuite ERP revenues jumped 29%.

Oracle CEO, Safra Catz said, “The consistent rapid growth in the now multibillion-dollar ERP segment of our cloud applications business has enabled Oracle to deliver a double-digit EPS growth rate year-after-year. I fully expect we will do that again this year.

Its second-quarter earnings per share rose 12% year over year to $0.90. Operating cash flow stood around $13.8 billion in the trailing twelve months.

Dividend Growth is at Risk

The slower than expected financial growth could also impact its cash returns. The company is planning to invest in organic and inorganic growth opportunities to support revenue growth. Therefore, Oracle is likely to stick with its quarterly dividend of $0.24 per share. Moreover, Oracle stock price has a limited upside considering the increasing market competition.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.