NYSE: Buy the dip on Oracle shares?

[MongiIG]

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

Source: Bloomberg

 

Shares Oracle Corporation Price Candlestick Revenue Cloud computing

 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

Source: 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

Source: 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).

Source: 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.

Source: IG

 

 

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