If peace does indeed hold, there will likely be a continuing market rally in the weeks ahead. It’s a big deal. Meanwhile, Oracle Corp. (ORCL) reported earnings recently into a market that had recently soured on the AI trade after Broadcom Inc. (AVGO) earnings the week before, writes Tom Hutchinson, editor of Cabot Income Advisor.
High oil prices led to higher inflation, which led to higher interest rates. Those things were holding back the economy and the market. Now, the price per barrel of crude oil just fell to the lowest level since the beginning of March.
Oracle Corp. (ORCL)
The resilient economy isn’t precarious. The current restraints are precarious. When falling oil prices unleash a stronger economy, it should change things for the better. Just when the AI trade discombobulated, the end of the war could be a new market catalyst.
As for Oracle, the earnings results themselves were solid. Revenue jumped 21%, and earnings per share rose 20% over last year’s quarter. The company forecast revenue growth of 27% to 29% and EPS growth of 16% to 19% next quarter.
But the real story is future growth. Cloud revenue grew 47% in the quarter, and growth is forecast to be 58% to 64% next quarter. The company increased its backlog of orders for AI services to a whopping $638 billion.
The market seems to go back and forth about being excited about the massive growth ahead and being skeptical about the investment required and the hit to earnings before this revenue comes to fruition.
The story has changed since the stock soared 80% in less than two months. But investors’ moods will swing around. I still think this stock can soar in the months and years ahead.
