- Oracle stock has experienced rapid growth and decline recently.
- The market expects the company to deliver tangible growth, failure might result in harsh declines
- It's paramount that the management board "reads the room" on CAPEX
- Oracle stock has experienced rapid growth and decline recently.
- The market expects the company to deliver tangible growth, failure might result in harsh declines
- It's paramount that the management board "reads the room" on CAPEX
Oracle, one of the leaders in cloud services and infrastructure, will be releasing its results after the close of Wednesday's session in the USA. The company's valuations have experienced a year of dramatic changes in valuation and sentiment.
A proper increase in revenues and profits, combined with an unprecedented backlog growth driven by the agreement with OpenAI, has propelled Oracle's valuations to new heights. However, investors quickly began to scrutinize the company's planned cash flows, particularly CAPEX. The company is attempting to generate CAPEX at the level of so-called mega-caps, despite not being one itself. Additionally, it is trying to do so under conditions where Oracle is already burdened with a debt-to-equity ratio of approximately 450%. This has raised significant concerns, leading to the company losing about 30% of its valuation in recent months, along with a noticeable increase in CDS contract activity.
What are the expectations for the results?
Recent publications have often disappointed investors in terms of revenues and profits, but they have compensated with prospects, forecasts, investments, or dynamic development in key areas. This time, however, shareholders may demand the realization of at least some of these promises.
Earnings expectations are around $1.64 per share, with revenues expected to be around $16.19 billion. Another disappointment in these areas may not be received with the same patience by investors as in previous conferences. Importantly, investors will ultimately pay more attention to profitability than revenue.
What may prove absolutely critical is the proper interpretation by the company's management of the market's attitude towards CAPEX. They are no longer a value in themselves, and further increases in the current situation may provoke further devaluation.
ORCL.US (H1)
Source: xStation5
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