- GRIT
- Posts
- 👉 Oracle Hits All-Time Highs
Happy Sunday, everyone.
Attention all paid subscribers — I’ll be hosting my first monthly livestream tomorrow, Monday (9/16), at 6pm ET. The stream will last about 45-minutes, and I’ll walk everyone through my portfolio, general investing strategy / playbook, as well as share a mid-month update on the markets.
We’ll also be joined by the legendary Genevieve Roch Decter! We’re excited to have you there with us!
As a reminder, paid subscribers get access to both my Dividend Growth Portfolio + are invited to join these monthly livestreams. Paid subscribers will be emailed instructions as how to join the stream tomorrow after The Investing Week Ahead is published.
If you’re not a paid subscriber — click the link below! We are currently running a massive discount that ends after September.
Portfolio Updates:
During the month of September I’ll be deploying $10,000 into my investment accounts — and I’m eager to share the newest one (shown above).
I just opened an investment account on a platform called Double Finance — essentially they allow investors to build their own investment strategies from scratch, or use their pre-existing ideas. I’m not interested in building one from scratch, so I’m using their “Large Market Beaters” strategy.
According to their website, the strategy is described as:
Large market cap (over $200B)
Over the last 12-months delivered 20%+ returns
When this simple strategy was back tested by 10 years, the annual return was +28% with a max drawdown of -27%. Below are the specific holdings inside of this strategy, as well as how my $5,000 is deployed amongst them.
Double Finance isn’t sponsoring this newsletter or telling me to share this with you — I’m just a guy on the internet trying to find interesting ways to outperform the stock market. If you end up building your own strategy — let me know! I’d be happy to check it out.
The other $5,000 was just deposited into my Dividend Growth Stocks portfolio as highlighted above. Essentially all of this money will be invested into Berkshire Hathaway over the coming weeks — as I continue to build a sizable position in the company.
With that being said, I’ll be opportunistically building upon my $1,925 position in DraftKings (DKNG) as well.
As always, if you’re a paid subscriber and want to review all of the specific positions in my portfolio — click here.
Week in Review — Too Long, Didn’t Read:
Oracle’s remaining performance obligations grew by +53%, Adobe’s Digital Media ARR guidance disappoints, Kroger raised their dividend by +10%, another lackluster Apple event, Google’s potential big break-up, Disney finally reaches a deal with DirecTV, the Consumer Price Index (CPI) came in cooler, but the Core CPI was higher than expected, consumer sentiment continues to rise in the short-term, and U.S. imports dropped substantially in August.
Key Earnings Announcements:
Oracle’s remaining performance obligations grew by +53%, Adobe’s Digital Media ARR guidance disappoints, and Kroger raised their dividend by +10%.
Oracle (ORCL)
Key Metrics
Revenue: $10.5 billion, an increase of +10% YoY
Operating Income: $4.0 billion, an increase of +21% YoY
Profits: $2.9 billion, an increase of +21% YoY
Earnings Release Callout
“As Cloud Services became Oracle’s largest business, both our operating income and earnings per share growth accelerated.
In Q1, 42 additional cloud GPU contracts were signed for a total of $3 billion. Our database business growth rate is increasing as a result of our MultiCloud agreements with Microsoft and Google. At the end of Q1, 7 Oracle Cloud regions were live at Microsoft with 24 more being built, and 4 Oracle Cloud regions were live at Google with 14 more being built. Our recently signed AWS contract was a milestone in the MultiCloud Era. Soon customers will be able use the latest Oracle database technology from within every Hyperscaler’s cloud.”
My Takeaway
Oracle (ORCL) shares now trade at all-time-highs following their earnings report — and for good reason.
Total remaining performance obligations (RPO) grew by +53% to $99B, foreshadowing what’s to come for the company as AI continues to remain top of mind for Big Tech. Cloud infrastructure revenue grew by +45% as, according to management, Oracle’s MultiCloud agreements with Microsoft, Google, and Amazon begin to scale.
To me, it seems like Oracle is evolving into an essential provider at the foundational layer for companies focused on AI. Oracle’s database systems are now key to supporting Big Tech — which is why Oracle is not experiencing their “seasonal slowdown” in RPO growth.
“While we typically see a seasonal decline of RPO in Q2, we signed several large deal this past quarter, resulting in a sequential increase in RPO compared to the decline that we typically see based on our experience over the previous five years.”
There’s a lot to look forward to with this company — their customers have the deepest wallets (Big Tech), and they’ve already proven their appetite to spend. However, Oracle’s P/E ratio is hovering ~28X and has never been this high.
Personally, I do not hold a position and will not be chasing this one higher.
Adobe (ADBE)
Key Metrics
Revenue: $5.4 billion, an increase of +11% YoY
Operating Income: $2.0 billion, an increase of +17% YoY
Profits: $1.7 billion, an increase of +20% YoY
Earnings Release Callout
“In Q3, Adobe delivered cash flows of over $2 billion and exited the quarter with record RPO, demonstrating the power of combining growth with world-class profitability. Given the massive markets we are catalyzing, I’m confident in our ability to drive growth and industry leadership.”
My Takeaway
Adobe’s stock price fell -10% after reporting their quarterly results.
Despite beating Wall Street’s expectations, their forward guidance caused investors to get spooked — and rightfully so — as AI monetization is not picking up at the pace Adobe’s management had originally anticipated.
Despite Firefly, Adobe’s Photoshop AI tool, having generated now over 12 billion images as of Q3 (+33% sequentially) — Digital Media revenue only grew +11% YoY.
The company also guided to weak net new Digital Media annual recurring revenue (ARR) of only $550M for Q3. According to management, the guidance was weaker than expected because they closed some major deals during fiscal Q3 that now won’t be reflected into fiscal Q4. However, as you can see below, their fiscal Q3 ARR growth wasn’t anything out of the ordinary — leaving myself and Wall Street a bit puzzled.
As you all might remember, Adobe was one of my AI stock picks back in 2023 — and I’m very surprised to see they haven’t monetized the technology in a more meaningful way since. As you can see above, Wall Street expects their free cash flow to grow by +27% in 2025 and another +12% in 2026.
I’ll remain a patient shareholder as their share price hopefully rises with free cash flow growth.
Kroger (KR)
Key Metrics
Revenue: $33.9 billion, flat YoY
Operating Income: $815.0 million, compared to -$479.0 million last year
Profits: $466.0 million, compared to -$180.0 million last year
Earnings Release Callout
“Our solid sales results through the first two quarters of the year give us the confidence to raise the low end of our full-year identical sales without fuel guidance by 50 basis points.
We now expect identical sales without fuel to be in the range of 0.75% to 1.75%. Our positive customer trends are driving sales momentum that we expect to continue in the second half of the year.”
My Takeaway
Shares of Kroger (KR) climbed by +7% after the company reported strong earnings. Despite earnings per share (EPS) falling short of Wall Street’s expectations, revenue and adj. EPS exceeded analyst estimates.
As you can see shared above, their quarterly revenue was flat at $33.9B — but this figure was still +$207M above Wall Street’s expectations.
Digital sales grew by +11%, while Delivery sales climbed by +17% — still an unprofitable side of the business. With that being said, Kroger’s market share of “households using e-commerce to buy their groceries” increased by +14% during the quarter — incredibly important as this side of the business drives volume growth through their customer fulfillment centers.
The company also announced a +10% raise in their quarterly dividend — one of the key reasons I own this name in my Dividend Growth Stocks portfolio. They’ve now growth their dividend at a +13.5% compounded annual growth rate since being reinstated in 2006. This also marks 18 years of consecutive dividend increases.
As the company’s free cash flow climbs over the coming years (as shown in the chart above), I’m expecting more double-digit dividend hikes.
I remain a happy shareholder, and I’ll continue to build upon this position over time.
Investor Events / Global Affairs:
Another lackluster Apple event, Google’s potential big break-up, and Disney finally reaches a deal with DirecTV.
Apple (AAPL) Event Recap
Source: Apple
At Apple’s latest event, the company unveiled the iPhone 16 and 16 Pro, both designed to leverage new AI features called "Apple Intelligence." The new iPhones come with faster processors, action buttons, and improved battery life — with Pro models offering enhanced cameras for creative tasks.
Apple also introduced slimmer, brighter Apple Watches, including a new sleep apnea detection feature, pending FDA approval.
AirPods received a significant software update allowing them to function as hearing aids, though this too awaits regulatory clearance. The event highlighted Apple’s continued focus on integrating AI across its hardware lineup. Lastly, all updated devices will now feature USB-C charging.
Apple (AAPL) Stock Performance, 5-Year Chart, Seeking Alpha
"Apple's event was largely as expected. Camera Control is an exciting innovation, and stable pricing is a positive in an uncertain consumer backdrop. However, the staggered roll-out of Apple Intelligence could dampen excitement. The stock already prices in 'super cycle' excitement."
The Path to Breaking Up Google (GOOG)
Source: WSJ
Google is facing increasing pressure from dual antitrust cases, sparking concerns about potential breakups. A federal judge ruled last month that Google engaged in illegal practices to maintain its dominance in search, and a second trial now targets its ad-tech business. While a breakup isn't imminent, investors are starting to price in the risks, with Alphabet's stock down nearly 14% this quarter.
Source: WSJ
Analysts see the ad-tech case as less damaging, but the search case could have far-reaching implications, including the possibility of divesting Android or Chrome. Uncertainty looms, and the final outcomes may take years to resolve, adding long-term risk to Google’s valuation.
As a long-term Google investor, this doesn’t scare me. I’ll continue to take advantage of this opportunity by purchasing more shares.
DirecTV (T) and Disney (DIS) Finally Reach Deal
Source: Deadline / Vertigo3d / Steve Chenn / Getty Images / DirecTV / TWDC
Disney and DirecTV have reached an agreement to end a two-week blackout just in time for college football on Saturday morning. This restored access to ESPN and other Disney channels.
The blackout had deprived DirecTV's 11 million customers of live sports, including the U.S. Open and "Monday Night Football." The dispute centered around fees and bundling structures, with DirecTV seeking more flexible, genre-specific bundles, which Disney initially resisted. The new deal includes "market-based terms" and allows DirecTV to offer Disney's streaming services, including ESPN+, Disney+, and Hulu, as well as a future ESPN streaming service.
Disney (DIS) Stock Performance, 5-Year Chart, Seeking Alpha
AT&T (T) Stock Performance, 5-Year Chart, Seeking Alpha
Terms of the new proposed deal include DirecTv paying “market-based” rates to carry Disney’s channels.
Major Economic Events:
The Consumer Price Index (CPI) came in cooler, but the Core CPI was higher than expected, consumer sentiment continues to rise in the short-term, and U.S. imports dropped substantially in August.
Consumer Price Index (CPI)
Source: CNBC
In August 2024, consumer prices increased by +0.2% — placing the annual inflation rate at +2.5%. This marks the lowest annual inflation level since February 2021.
Core inflation (excluding food and energy) rose by +0.3%, slightly above expectations, holding the 12-month core inflation rate at 3.2%. Housing costs remained a concern, with the shelter index rising 0.5% for the month, contributing to 70% of the core increase and showing a +5.2% year-over-year rise.
Energy prices decreased by -0.8%, while food prices rose by +0.1%. Average hourly earnings outpaced inflation, rising +0.2% in real terms for the month. Traders priced in an 85% likelihood of a 25 basis point interest rate cut at the Federal Reserve’s September meeting.
“This isn’t the CPI report the market wanted to see. With core inflation coming in higher than expected, the Fed’s path to a 50 basis point cut has become more complicated.”
Consumer Sentiment
Source: VettaFi
The University of Michigan Consumer Sentiment reading rose to 69 in September from 67.9 in August. This marked the second consecutive monthly improvement, and the measure’s highest level since May.
The increase was attributed to lower prices for durable goods like cars and furniture, as well as expectations of future interest rate cuts from the Federal Reserve. Despite this improvement, the index remains significantly below pre-pandemic levels — having risen about 40% since inflation peaked in June 2022.
A record 54% of consumers now expect interest rates to drop within the next year.
However, concerns persist about consumer spending sustainability as savings dwindle and credit card debt rises. Economic growth was solid at +3% in the second quarter, but some economists worry about a potential slowdown.
We remain very interested in how the consumer sentiment could change with the upcoming presidential election.
U.S. Import Price Index
Source: Thomson Reuters
Imported fuel prices dropped -3.0% in August, with petroleum products down -3.2%. In contrast, fuel prices had risen +1.1% in July. Food prices edged down -0.1% after a sharp +1.5% jump the previous month. Excluding fuel and food, import prices decreased -0.1%, following no change in July.
The strong dollar against key trading partners' currencies has helped keep imported inflation in check. Core import prices were up +1.1% year-on-year in August.
"It seems likely that non-fuel import prices generally should firm moderately on a forward basis given the lagged nature of the pass-through of dollar moves into import prices, all else equal.”
The author, publisher or insiders of the publisher may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Regarding the contents of this specific edition, the author, publisher, or insiders of the publisher hold long positions in ADBE and KR.
Cover Image Source: Cristi Croitoru
Grit is a publisher of financial information, not an investment advisor. Grit does not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient. Grit does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. INVESTORS SHOULD OBTAIN INDIVIDUAL INVESTMENT ADVICE BASED ON THEIR OWN CIRCUMSTANCES BEFORE MAKING AN INVESTMENT DECISION
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
The author, publisher or insiders of the publisher may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and Grit undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
Grit does not accept any liability whatsoever for any direct or consequential loss, however arising, directly or indirectly, from any use of the information contained herein.
By using the Site or any related social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.
Please read: Terms of Use, Privacy Policy, Disclosure Policy and Disclaimer Policy
If you have any questions please contact us at info@gritcap,io
Reply