Long Way To Fall For The Cloud?
It would seem that the large cloud services providers have a long way to fall insofar as their equity valuations are concerned.
2023 has been an interesting year for the cloud services companies. Stock prices are up sharply for the year for AMZN, MSFT, GOOGL, even ORCL before today’s hit to ORCL shares, yet the cloud services business for each company has slowed from last year. This despite price increases.
At some point the fundamentals must matter again. Business is slowing. The economy is slowing. Yet equity valuations are up sharply. I am in the camp that the next move for the economy is down.
Even if the Fed lowers rates early next year (I do not expect it to), the economy will head south in my view. AMZN, MSFT and GOOGL have far to fall as do others. Historically the equity market bottoms after the Fed lowers rates.
Here is ORCL’s report from yesterday which has the benefit of an 8% price increase across its U.S. Support business. ORCL shares ought to be down even more given the company’s “also ran” status.
