Investors came into this week looking at the potential impact of inflation on the Federal Reserve's plans for monetary policy in 2024. The latest reading of the Consumer Price Index (CPI) was appropriately benign, with the headline number rising 0.1% even as core CPI climbed a somewhat less cheery 0.3%. Stock index futures initially jumped on the news but settled down to more modest gains later in the premarket session on Tuesday morning.
One stock weighing on the market on Tuesday is Oracle (ORCL 2.60%), which reported financial results late Monday that didn't meet investors' high expectations. However, a small vaccine stock called Icosavax (ICVX +0.00%) found itself in the spotlight, as it got a buyout bid from a major pharmaceutical giant that could bring a big reward to its shareholders. Read on for the details.
Oracle sees slower growth
Shares of Oracle were down 9% early Tuesday morning. Even though the tech giant continued to benefit from high demand related to artificial intelligence (AI) and enterprise digital transformation, investors had wanted to see clearer signs of dominance from the software company.
Oracle's fiscal second-quarter financial results from the period ended Nov. 30 were solid. Revenue of $12.94 billion was up 5% year over year. Adjusted net income of $3.8 billion climbed a healthier 14% from year-ago levels, producing adjusted earnings of $1.34 per share.
NYSE: ORCL
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CEO Safra Catz noted that Oracle's remaining performance obligations ballooned to more than $65 billion, which is more than a full year's worth of sales at recent rates. Catz attributed the gains to strong demand for its cloud infrastructure and generative AI services, with cloud services in particular producing almost $20 billion annually in sales for Oracle. Chief Technology Officer Larry Ellison pointed to plans to expand 66 of Oracle's existing data centers while building 100 new ones to meet demand that he characterized as "over the moon."
Yet investors had anticipated that Oracle would already see higher revenue than it posted for the quarter. Even a roughly 1% shortfall on the top line was enough to prompt a substantial panic for the mega-cap stock, and even an upbeat outlook for Oracle's future didn't suffice to make shareholders happy.
Icosavax gets a sweet deal
Shares of Icosavax, on the other hand, climbed almost 50% early Tuesday. The maker of vaccines for preventing respiratory syncytial virus and other respiratory diseases got a lucrative buyout bid from AstraZeneca (AZN +0.00%).
The terms of the proposed deal looked good for Icosavax shareholders. AstraZeneca has offered to pay $15 per share in cash for investors in the small vaccine stock. As a potential sweetener, Icosavax shareholders will also get a contingent value right that could pay them as much as an additional $5 per share in cash if Icosavax products reach certain milestones, including regulatory approval and sales levels.
NASDAQ: ICVX
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For Icosavax, access to AstraZeneca's capital and huge clinical resources could dramatically accelerate its efforts to continue developing useful vaccines. Meanwhile, for AstraZeneca, Icosavax will provide a valuable boost to its pipeline of potential candidate products.
Even though Icosavax currently has no revenue, AstraZeneca's move shows that promising biotech companies have plenty of value just from their potential alone. Indeed, with the stock trading above the $15-per-share cash offer price, Icosavax investors have high hopes that its products will be successful enough to meet the triggers for a payout under their contingent value rights -- or that an even higher rival bid will emerge.
