On Friday morning, stock markets were predicted to have a turbulent start after Thursday’s route. Following the release of the most recent U.S. employment report indicating an increase of 311,000 jobs in February, stock index futures experienced an upward trend.
Dow Jones Industrial Average futures went into positive territory, while the S&P 500 and Nasdaq futures also rose.
Oracle Shares Fall in Pre-market Trading
Despite the positive market trend, Oracle’s shares fell by 4% in premarket trading on Friday morning. The software company reported solid financial results for the fiscal third quarter that ended Feb. 28, with revenue growing by 18% year over year to $12.4 billion. However, earnings dropped by about a fifth to $0.68 per share.
On an adjusted basis, Oracle’s bottom line moved slightly higher by about 7% to $1.22 per share, which was at the upper end of the guidance that the software company had offered earlier. Oracle’s cloud business saw revenue jump 45% during the quarter to $4.1 billion, but its enterprise resource planning software product lines didn’t see the same magnitude of gains.
Investors are concerned that Oracle has been late to the game in taking maximum advantage of cloud computing trends. Oracle is projecting a 16% sales increase in the current quarter, but investors are looking closely to see if enterprise customers pull back on their software spending.
DocuSign Shares Drop Even More
DocuSign’s stock decreased even more, by 13% in premarket trading on Friday morning. The electronic signature and document management company showed modest growth in its numbers for the fiscal fourth quarter ending Jan. 31, with revenue of $660 million up by 14% year over year.
Adjusted earnings per share rose to $0.65 from $0.48 in the previous year’s period, partly due to improved margin levels.
Free cash flow soared more than 60% to $113 million for the period. However, investors weren’t entirely comfortable with DocuSign’s guidance for the near future, with sales of $639 million to $643 million projected for the first quarter of the new fiscal year.
For the full year, projections for around $2.7 billion in revenue imply that annual growth will slow to just 7%, compared to a 19% rise in the just-ended fiscal year. Some customers are pulling back on their IT budgets, and it’s unclear whether DocuSign will be able to recover fully from the huge drop its stock suffered in recent years.
Concerns Over Up-and-coming SaaS Companies
The drop in Oracle and DocuSign’s shares suggests greater pressures on up-and-coming software-as-a-service (SaaS) companies. If companies like Oracle and DocuSign don’t get back to their past pace of growth, it could cause a loss of confidence throughout the stock market and extend the bear market longer than expected.
Investors are also worried about the impact of the COVID-19 pandemic on the stock market. With rising cases and the vaccine rollout still underway, the stock market may continue to be volatile in the coming months.
While the positive jobs report helped to rally stock markets, concerns remain about the growth prospects of SaaS companies like Oracle and DocuSign. Investors are closely watching these companies to see if they can regain their past pace of growth and maintain their position in the market.
