Oracle (ORCL) stock was down sharply Friday, the day after it hosted a forum on artificial intelligence. Oracle stock analysts came away from the event largely positive but noted there are ongoing supply challenges in building out AI infrastructure.
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On the stock market today, Oracle is down 5.8% to 102.05 in recent action. The losses continue a recent slump, outpacing declines of peers in database software on a bumpy day for the markets.
On Thursday, top company executives including Chairman Larry Ellison spoke at the Oracle AI Executive Forum to highlight how to “to take advantage of AI in your own business today to increase productivity.”
Oracle Stock Analysts Like AI Plans
The event aimed to provide product updates to customers of the Oracle Cloud Infrastructure (OCI). Analysts appear to have come away from the event with positive impressions about demand for Oracle’s cloud infrastructure services.
OCI is a key part of Oracle’s bid to become a bigger player in the cloud and hosts its main generative AI offering for businesses.
UBS analyst Karl Keirstead says the company’s commentary Thursday clarified that it was facing supply constraints, not demand issues, for its OCI business. That was a key investor debate following the company’s earnings report in September, he said.
“Oracle cited a number of bottlenecks, with an emphasis on facilities, power and network gear as much as actual GPU (graphics processing unit) availability,” Keirstead wrote in a client note Friday. “We suspect that Microsoft (MSFT) and Amazon (AMZN) are facing the same infrastructure capacity expansion challenges.”
The UBS analyst remains positive on Oracle stock “partly on a view that the AI lift to OCI will come; it is a when/timing (not an if) question.”
JPMorgan Say Supply Challenges Remain
JPMorgan analyst Mark Murphy said in a note Friday that the supply challenges could mean conversion of bookings to revenue will take longer than expected.
“Due to the barriers which are limiting the rate of modern Gen AI data center construction … our sense is that some Street assumptions for conversion from bookings to revenue may prove to be too aggressive,” Murphy wrote in a Friday client note. “In fact, it appears that little to none of the $4 (billion) AI backlog should be expected to be recognized in the current FY24.”
But that does not represent a nudge down for previously estimated Oracle revenue, as the company acknowledged the longer buildout in its previous comments, Murphy added. “However it is possible that the OCI mix or other aspects of the composition could pan out a bit differently for FY24, with some of what is expected to come in FY24 entering the picture in FY25.” Oracle’s fiscal year ends in May.
Recent Slide For Oracle
The slide on Friday adds to a rough couple months for Oracle stock. Shares are up about 25% this year but have slumped since the company reported earnings on Sept. 11.
Oracle’s first-quarter earnings report led to one of the company’s worst-ever trading days. Oracle stock slid more than 13% after the company reported revenue guidance short of views. Moreover, the company said its cloud revenue grew 30% year over year to $4.6 billion. That marked a slowdown from the 54% cloud revenue growth in the fourth quarter.
Oracle stock is down nearly 20% since then.
Still, the IBD Stock Checkup tool shows that Oracle has a Composite Rating of 90 out of a best-possible 99. The rating means Oracle stock currently outperforms 89% of all stocks based on fundamental and technical stock-picking criteria.
Also, Oracle is on the IBD Tech Leaders list.
In addition, shares have a Relative Strength Rating of 92 out of 99. Relative Strength measures how a stock’s price performance over the last 52 weeks holds up against other stocks in IBD’s database.
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