Markets are continually full of surprises, and we got a whopper last night. Investors were awaiting earnings from Oracle (ORCL), and at first blush the EPS miss failed to impress. But if we needed a reminder of our contention that corporate guidance is by far the most important factor for a stock\u2019s performance, we got one in spades from ORCL. Remember, quarterly reports are backwards looking but markets are relentlessly looking towards the future. And ORCL\u2019s leap means it might be time for a new market acronym.<\/p>\n\n\n\n
Quite frankly, I can\u2019t remember the market completely repricing a company anywhere close to ORCL\u2019s size this quickly \u2013 at least not in a positive way. But if management\u2019s belief that cloud revenues will rise from $10.3 billion to $144 billion in five years is achievable \u2013 meaning just under 14X growth, or roughly 70% compounded per annum over that period — then the stock is certainly due the sort of positive reassessment that it is getting today. If we\u2019d gotten this sort of prediction from a less established company, then investors might be able to shrug it off as either a lie or a misplaced digit. Instead, this is from a blue-chip company with proven, well-respected management. The guidance is beyond stunning. Who cares that Q1 EPS missed by a penny?<\/p>\n\n\n\n
Revised expectations of this magnitude force us to reevaluate our thinking about spending related to artificial intelligence. I\u2019ve had several recent conversations \u2013 particularly after Nvidia\u2019s (NVDA) latest earnings report — about whether there would be a natural plateauing of AI-related expenditures as end users focused less upon simply acquiring and building out AI projects and more on profitably utilizing the new technology. That has been the case throughout history as new technologies were invented and adopted. It was certainly the case with the internet. The technology was perhaps even more transformative than its early evangelists expected, but the implementation hardly occurred overnight. ORCL clearly believes otherwise! <\/p>\n\n\n\n
Some of you might be wondering why the Nasdaq 100 (NDX), the index usually described as \u201ctech heavy\u201d, is not performing even better than its roughly 0.3% rise. Here\u2019s something I\u2019d forgotten \u2013 ORCL is listed on the NYSE, not Nasdaq! Hence, it can\u2019t be included in NDX. There are plenty of other tech winners in NDX, such as Broadcom (AVGO, +9%) and NVDA, (+4%), but it is not benefitting directly from ORCL\u2019s gain and is being subdued by the now typical \u201csell the news\u201d reaction to Apple\u2019s (AAPL, -3%) latest product launch. ORCL is a key reason why the S&P 500 (SPX, +0.4%) is outpacing NDX, despite the enthusiasm in many technology shares.<\/p>\n\n\n\n
Today\u2019s giant leap in ORCL pushes it into rarefied air. It came into the day as the US company with the 19th highest market capitalization (after combining Alphabet\u2019s GOOG + GOOGL). It is now in the #10 slot with a market cap of about $950 billion just behind Berkshire Hathaway (BRK.B), having surpassed JPMorgan (JPM), Eli Lilly (LLY), Visa (V) and others. ORCL must now be considered a key bellwether for the key sector that has driven the bull market for the past 3 years. (Remember, the rally began in November 2022, which was also when ChatGPT was released. Coincidence? I think not.)<\/p>\n\n\n\n
As a result, it seems like it\u2019s time for a new acronym. I\u2019ve long advocated for AVGO to get some love as a member in good standing of the \u201cMagnificent 7\u201d, especially now that it is larger than Tesla (TSLA), and floated the idea of a \u201cGreat 8\u201d to replace the current construct. Quite frankly, I haven\u2019t been able to come up with a catchy phrase involving the word \u201cnine\u201d even as a devoted baseball fan. Instead, I\u2019ll suggest a reversion to an acronym, like our former friend \u201cFAANG\u201d. <\/p>\n\n\n\n
How about \u201cGAMMATON\u201d (G<\/strong>oogle, A<\/strong>pple, M<\/strong>icrosoft, M<\/strong>eta, A<\/strong>mazon, T<\/strong>esla, O<\/strong>racle, N<\/strong>vidia)? Those who were long gamma in ORCL options must be in favor of that idea. It sounds both (options) market related and explosive, even if it is nonsensical. <\/p>\n\n\n\n I\u2019ll let that suggestion percolate. But the need to consider ORCL among the key megacap technology stocks is anything but nonsensical. They placed themselves firmly in the market\u2019s viewfinder when it comes to all things AI.<\/p>\n","protected":false},"excerpt":{"rendered":" Investors were awaiting earnings from Oracle (ORCL), and at first blush the EPS miss failed to impress.\u00a0 But if we needed a reminder of our contention that corporate guidance is by far the most important factor for a stock\u2019s performance, we got one in spades from ORCL.\u00a0 Remember, quarterly reports are backwards looking but markets are relentlessly looking towards the future.\u00a0 And ORCL\u2019s leap means it might be time for a new market acronym.<\/p>\n","protected":false},"author":4,"featured_media":184228,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14700,6,8,9,22,26,3],"tags":[632,19301,18821,6954,4919],"contributors-categories":[13576],"class_list":{"0":"post-230342","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-market-insights","8":"category-north-america","9":"category-region","10":"category-securities","11":"category-stocks","12":"category-text-articles","13":"category-traders-insight","14":"tag-ai","15":"tag-earnings-guidance","16":"tag-market-capitalization","17":"tag-oracle","18":"tag-tech-stocks","19":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n