Oracle Analyst Downplays Reports Of DoD Contract Cancellation But Retail’s Worried

Oracle Corp. (ORCL) stock came under selling pressure on Friday, dragged lower by the market-wide negative sentiment and a report that suggested a Department of Defense (DoD) contract could be canceled.

Bloomberg reported Friday that the DoD will terminate its contract with Oracle with regard to the use of the latter’s software to manage its civilian workforce.

The report noted that the contract announced in 2019 pertains to the management of the Pentagon’s 900,000 civilian employees, with Leidos Holdings Inc. (LDOS) providing services and support for the initiative. 

Defense Secretary Pete Hegseth signed a memo earlier this month, terminating more than $580 million in programs, contracts, and grants.

This was part of efforts to end various spending identified by the Department of Government Efficiency (DOGE) that does not match the priorities of President Donald Trump or the Defense Department.

Following the rumor, Jefferies said the company confirmed to it that the DoD did downsize its plans to move its human resource workloads from on-premise to the cloud, according to The Fly.

However, the DoD will remain an on-premise customer and will continue its maintenance and support contracts with Oracle, the firm added.

The brokerage also noted that Oracle said the DoD project became too complicated in how it was being implemented from a services perspective and that component has been cut, but that the actual on-premise HR software contract remains intact.

Jefferies said the headlines read more negatively than the fundamental impact.

The firm maintained a ‘Buy’ rating and a $220 price target on Oracle stock, implying an upside of over 56% from Friday’s closing price.

On Stocktwits, retail sentiment toward the Oracle stock stayed ‘extremely bearish’ (24/100), while the message volume was at ‘low’ levels.

A bearish watcher said Oracle could drop down to $60 by the end of the year, blaming their pessimism on a potential collapse of the U.S. economy.

Another user said the loss of the contract which is one of the major driver of bullishness, could generate negative sentiment toward the stock.

Oracle stock fell 3.37% to $140.87 on Friday and has lost over 15% this year.

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