Yahoo Finanza Oracle Could Sell Off into the 70s
Oracle Corp. (ORCL) is trading lower by more than 2% in Tuesday’s pre-market after posting a fiscal Q1 2022 profit of $1.03 per-share, $0.06 better than estimates, while revenue rose a modest 3.8% year-over-year to $9.73 billion, matching consensus. Fusion ERP cloud revenue rose a healthy 32% while NetSuite ERP cloud revenue gained 28%. IaaS plus Saas cloud revenue of $2.5 billion booked 25% of total quarterly revenue, with cloud services and license support up a modest 6% to $7.4 billion.
Strong Cloud Growth
Inline Q2 earnings-per-share (EPS) guidance of $1.09 to $1.13 triggered a swift sell-the-news reaction, dropping the stock to the lowest low since late July. However, Oracle has still gained nearly 35% so far in 2021 so the bearish reaction can be viewed as simple profit-taking, rather than a long-term change in trend. Even so, it’s now trading below the 50-day moving average for the first time since June, raising odds from even lower prices in coming sessions.
Executives boasted that cloud income has become a larger proportion of total revenue, noting that “Oracle’s two new cloud businesses, IaaS and SaaS, are now over 25% of our total revenue with an annual run rate of $10 billion. Taken together, IaaS and SaaS are Oracle’s fastest growing and highest margin new businesses. As these two cloud businesses continue to grow they will help expand our overall profit margins and push earnings per share higher.”
Wall Street and Technical Outlook
Wall Street consensus is rather bearish, with a ‘Hold’ rating based upon 5 ‘Buy’, 1 ‘Overweight’, 18 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions. Price targets currently range from a low of $60 to a Street-high $115 while the stock is set to open Tuesday’s session about $2 above the median $85 target. This mid-range placement suggests that Oracle is fully-valued, especially with the mixed guidance.
Oracle failed a 2019 breakout above resistance in the low 50s in March 2020 and bounced strongly, returning to the prior peak in September. It cleared that barrier at year’s end, entering a heathy uptrend that stalled in the low 90s in July. An August breakout attempt failed, reinforcing a trading range that’s now set off weekly sell signals. The range floor below 88 is now being tested, raising odds for continued downside could reach the upper 70s in the fourth quarter.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire
