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NYSE: Buy the dip on Oracle shares?


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Having come close to their June all-time high, Oracle shares dropped heavily on disappointing earnings but remain in a long-term uptrend.

NYSESource: Bloomberg
 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 13 September 2023 16:41

Oracle shares drop but revenue from cloud services increased by 30%

Oracle’s earnings were a classic demonstration of ‘buy the rumour, sell the fact’, as well as the old adage that ‘it is better to travel than to arrive’. After a huge rally this year, the stock saw significant profit-taking following its results.

Oracle's shares dropped on Tuesday after the company reported first-quarter (Q1) results and revenue predictions that were lower than expected. The company's stock fell over 13% as a reaction to high expectations of its performance.

Oracle, a leading company in database software and cloud computing, reported on Monday that its adjusted earnings for the first quarter, ending August 31, increased by 16% compared to the previous year, reaching $1.19 per share. The company′s revenue rose by $12.45 billion.

Analysts had anticipated Oracle to have adjusted earnings of $1.15 per share on revenue of $12.45 billion, as per FactSet.

After the report was published, Oracle CEO Safra Catz gave a forecast for the current quarter that was lower than what analysts had predicted. The company expects to earn $1.32 per share for the current quarter, with a revenue growth of 6% at the midpoint of the company's range.

Oracle's (ORCL) stock fell to $109.62, marking a 13.5% loss in the stock market today. The disappointing earnings report from the company also negatively affected similar stocks.

Revenue from Oracle's cloud services increased by 30% to 4.6billion, compared to $41.5 billion for the Q1.

However, the company's older business lines continued to have difficulties. The revenue from cloud license and on-premises license fell by 10% to $800 million.

Technical analysis on the Oracle share price

Oracle’s share price, which year-to-date has risen by over 32% despite this week’s sharp sell-off, came very close to its June $127.54 record high on Monday when it hit $127.42.

Oracle Weekly Candlesticks Chart

Oracle Weekly candlesticks chartSource: Tradingview

The sharp drop in the Oracle share price has been seen by some as an opportunity to buy the share at discounted levels as it remains above its 2022-to-2023 uptrend line at $106.67. Together with the December 2021 peak at $106.34 it should act as good support.

As long as the $106.67-to-$106.34 support zone holds on a weekly chart closing basis, the long-term uptrend will remain intact.

If fallen through, however, the 200-day simple moving average (SMA) at $99.25 could be reached.

Oracle Daily Candlesticks Chart

Oracle daily candlesticks chartSource: Tradingview

This week’s huge $124.72 to $113.30 price gap is expected to at least partially get filled while the long-term uptrend line underpins. The 55-day SMA at $117.25 represents a possible upside target ahead of the July peak at $121.36.

Analysts’ recommendations and IG client sentiment

Fundamental analysts rate Oracle’s share price between a ‘buy’ and ‘hold’ with Refinitiv data showing 5 strong buys, 9 buys but 18 holds - with the median of estimates suggesting a long-term price target of $132.00 for the share, roughly 21% above the current price (as of 13/09/2023).

Oracle analystsSource: Refinitiv

IG sentiment data shows that 84% of clients with open positions on the share (as of 13/09/2023) expect the price to rise over the near term, while 16% of clients expect the price to fall. Trading activity over the last week shows 57% of buys and this month 54% of buys.

IG Oracle sentimentSource: IG

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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