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Oracle Stock Price: Warning Signs are Clear After Second Quarter

Oracle stock price

Oracle (NYSE: ORCL) stock price continues to trade in a narrow range over the past five months due to a lack of upside catalysts. The software company has been struggling to generate sustainable growth in the rapidly changing business environment.

The company’s revenue grew by only 2.17% in the past three years. In addition, its fundamentals are showing a tough time in the following quarters.

The latest financial results indicated slower growth compared to peers. On the positive side, ORCL’s management has been showing strong earnings growth potential. Oracle stock price is currently trading slightly below from 52-weeks high of $60 a share.

ORCL Oracle Corporation daily Stock Chart

Low Revenue Growth Hinders Oracle Stock Price

Oracle’s second-quarter results added to bearish sentiments. The company’s Q2 revenue came in at $9.6 billion, up only 0.5% compared to the year-ago period.

It’s Cloud Services and License Support revenue, which is the largest revenue contributing segment, grew only 3% year over year to $6.8 billion. Meanwhile, its closest competitors such as IBM and Cisco have reported high double-digit revenue growth from cloud businesses.

On the positive side, the company is forecasting substantial growth from the ERP segment of its cloud applications business.

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.

The company has generated double-digit earnings per share growth in Q2. Its second-quarter earnings per share of $0.69 increased by 14% from the year-ago period.

Slow Growth Could also Impact Dividends

Oracle had increased dividend by 26% last year. Unfortunately, the sluggish financial growth in the past two quarters and a bleak outlook for the full year doesn’t offer room for high double-digit dividend growth in fiscal 2020. Investors should expect a single-digit dividend increase from Oracle. Overall, Oracle stock price is likely to remain under pressure in the short term.

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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.