Oracle (NYSE:ORCL) caught the market off guard when the company unexpectedly released its fiscal 2020 Q1 earnings after the bell on Wednesday. Oracle hit on expected EPS, but revenue was short of what analysts had been expecting. More alarming to investors, it was also announced that co-CEO Mark Hurd will be taking a leave of absence for unspecified health-related reasons. Oracle stock opened at $53.32 on Thursday — down 5.27% — before recovering slightly to close at a 4.26% loss.
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Oracle Reports Q1 Earnings a Day Early
Investors can be unsettled when companies pull an audible and change the date they report earnings without warning. Doing so can send a signal that the company is trying to avoid analyst scrutiny — or at least delay it by catching them off guard. Oracle was expected to report its fiscal 2020 Q1 earnings on Thursday evening. Instead, the company pulled off a surprise Q1 earnings release after the bell on Wednesday.
Earnings per share of 81 cents were in line with expectations, but the $9.22 billion in quarterly revenue was a gain of just 0.3% compared to Q1 2019 and missed analyst expectations. Guidance for Q2 was also lower than expected, setting up ORCL stock to take a hit.
Also noted in those earnings was confirmation that Oracle’s board has approved an increase in share repurchases by an additional $15 billion, after spending $5 billion on buybacks during Q1.
All in all, the market reaction to the Q1 earnings report was very different from last quarter when Oracle stock got a boost instead of taking a hit.
Co-CEO Is Taking a Medical Leave of Absence
Another factor that almost always unsettles investors is an unexpected change in leadership at a company. And Oracle stock felt the effect of that issue on Thursday as well. During the Wednesday evening earnings call, it was announced that co-CEO Mark Hurd would be taking a leave of absence for an unspecified duration, for medical reasons.
Hurd joined Oracle in 2010 after his tenure as CEO and president of HP (NASDAQ:HPQ) ended as a result of accusations of an inappropriate relationship with an assistant. In 2014, when Oracle founder Larry Ellison stepped down from the CEO position to become CTO, Hurd took the reins as co-CEO along with former Oracle CFO Safra Catz. During the time that Hurd and Catz have run the company, Oracle stock had seen roughly 45% growth. That is until yesterday, when the news sank in and ORCL Stock dropped 4.26%.
During Hurd’s absence, Oracle announced that Safra Catz will continue as CEO, with Larry Ellison also helping to cover his responsibilities.
Oracle Stock Price Slightly Lagging Markets
So far in 2019, Oracle stock is up 19% (with yesterday’s drop factored in), which is not too bad all things considered. However, it’s being outperformed by the broader markets: the Nasdaq Composite is up 23% while the S&P 500 has notched a 20% gain.
Is Now the Time to Buy ORCL Stock?
With Oracle stock closing on Thursday at $53.89, there is a case to be made that the market over-reacted to the company’s announcements. On the other hand, when the Oracle stock price crossed the $60 threshold in early July, that was an all-time high for ORCL. If you look to market analysts, the 26 polled by CNN Business have a median 12-month price target for Oracle of $57.00 representing a bit of upside.
If you were eying an Oracle investment after seeing the Oracle stock price pass $60 in July, but didn’t want to buy at the peak, Thursday’s drop can be looked at as a buying opportunity.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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