Oracle (NASDAQ:ORCL) recently announced its fiscal third quarter results for the period ending February 2025, reporting earnings of $1.47 per share on revenues of $14.13 billion. This represents a 6% year-over-year increase in sales and 4% growth in earnings. However, the company fell short of Wall Street expectations, which had projected earnings of $1.49 per share on sales of $14.39 billion.
Despite missing analyst estimates, Oracle’s performance showed significant strengths. The company’s remaining performance obligations—a key indicator of future business—grew impressively by 62% to $130 billion, exceeding consensus estimates. Additionally, Oracle’s cloud infrastructure business, which is experiencing strong growth due to increased AI demand, posted a robust 49% year-over-year increase.
Still, what concerned investors was Oracle’s guidance for the upcoming quarter. The company forecasts revenue growth between 8% and 10%, below analysts’ expectations of approximately 11% growth. Oracle also projected adjusted earnings of $1.61 to $1.65 per share, falling short of the $1.79 per share that analysts had anticipated.
Beyond the impact of earnings, this is a concerning period for the broader markets, which creates additional challenges for Oracle. The growing economic concerns in the United States, sparked by President Trump’s implementation of tariffs, are fostering an unfavorable climate for markets in general. Oracle stock is unlikely to remain immune to these conditions. In fact, we think that ORCL stock could decline to as low as $110 per share.
Here’s the thing, in a downturn, ORCL can lose – no – there is evidence, from the recent economic downturns, that ORCL stock lost as much as 40% of its value over a span of just a few quarters. Now, of course, individual stocks are more volatile than a portfolio – and in this environment if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Why This Matters Now
While the surge in Oracle’s cloud infrastructure business is commendable, substantial macroeconomic headwinds warrant attention. Though inflation concerns have diminished, they haven’t disappeared. The current administration’s aggressive tariff and immigration policies have rekindled inflation anxieties, potentially signaling economic turbulence ahead.
Risk Factors to Consider
The heightened geopolitical uncertainty stemming from the new administration’s bold policy initiatives presents additional challenges. With ongoing conflicts in Ukraine-Russia, trade uncertainties, and strained negotiations with long-standing allies including Canada, Mexico, and Europe, the risk landscape has grown increasingly complex.
Concerning Performance Metrics
Notably, despite ORCL stock faring better than the benchmark S&P 500 index during the recent market downturns—a critical consideration for investors evaluating their risk tolerance in today’s volatile environment—it still experienced sharp declines.
While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
How resilient is ORCL stock during a downturn?
Inflation Shock (2022)
• ORCL stock fell 31.6% from a high of $89.28 on 10 January 2022 to $61.07 on 2 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 24 January 2023
• Since then, the stock has increased to a high of $192.43 on 21 November 2024 and currently trades at around $145
Covid Pandemic (2020)
• ORCL stock fell 28.3% from a high of $55.51 on 20 February 2020 to $39.80 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 July 2020
Global Financial Crisis (2008)
• ORCL stock fell 41.1% from a high of $23.52 on 10 August 2008 to $13.85 on 9 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 18 December 2009
In conclusion, although ORCL stock currently benefits from investor optimism fueled by substantial cloud growth during the AI surge, it trades at a premium valuation of 24x forward earnings, exceeding the stock’s four-year average price-to-earnings ratio of 20x. So ask yourself the question: if you want to hold on to your ORCL stock, will you panic and sell if it starts dropping to $110 or even lower levels?
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While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? See the last six market crashes compared.
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