Oracle Is Down 50%+ in Six Months. What Does Its Chart Say?
By:TradingView
Oracle ORCL is set to release fiscal Q3 results on Tuesday at a time when the AI-focused software-platform provider's shares have fallen more than 50% since hitting all-time highs in September. Let's check out what the stock's chart and fundamentals are saying.
Oracle's Fundamental Analysis
ORCL plans to report quarterly numbers after the bell on Tuesday, with the Street looking for $1.71 of adjusted earnings per share on $16.9 billion of revenue. That would represent a 16.3% gain from the $1.47 in adjusted EPS that Oracle saw in the same period last year, as well as 19.6% y/y sales growth.
However, analysts' forecasts seem to be moving in both directions on ORCL's upcoming earnings.
Fourteen of the 31 sell-side analysts that I can find who cover ORCL have cut their earnings estimates since the latest quarter began, while just 11 have raised their numbers. (Six have left their forecasts unchanged.)
A look back at Oracle's fiscal Q2 results released in November shows that the firm generated $2.066 billion in operating cash flow during that period.
That said, the company spent $12.033 billion on capital expenditures during the period, leaving free cash flow at a minus $9.967 billion.
But almost incredibly, Oracle still paid out $1.435 billion in cash dividends to shareholders during the period. That left Oracle with a $19.8 billion cash position and $34.4 billion of current assets at fiscal Q2's end.
Meanwhile, the firm's current liabilities added up to $37.8 billion as of fiscal Q2's close, including $8.1 billion of shorter-term debt and $9.9 billion of deferred revenue (which isn't a true financial obligation).
That means that Oracle's headline current ratio stood at 0.91 as of the quarter's end. That rose to 1.16 once adjusted for those deferred revenues.
For those who don't already know, a company’s current ratio is a measure of financial health should a firm need to liquidate for whatever reason.
The equation is simple -- current assets divided by current liabilities. Typically, a current ratio of 1.0 is considered the bare minimum for adequacy.
Oracle's Technical Analysis
Let's look at ORCL's chart going back some six months and running through Wednesday afternoon (March 4):
Readers will first notice a large falling-wedge pattern of bullish reversal running from about mid-October until today. This pattern appears to be possibly closing.
In fact, Oracle has already moved above the pattern's upper trendline and is trying to take its 21-day exponential Moving Average (or "EMA," marked with a green line above). That's the stock's apparent upside pivot for now, and it's also where the swing crowd could get involved.
At the same time, Oracle's 50-day Simple Moving Average (or "SMA," denoted by a squiggly blue line) isn't all that far away -- $172.30 in the chart above vs. ORCL's $152.96 close on Friday.
Meanwhile, Oracle's Relative Strength (the gray line at the chart's top) has steadily improved, although it remains weak.
Similarly, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) has firmed up as well.
For instance, the histogram of Oracle's 9-day EMA (the blue bars) has been in positive territory for almost a month. That's a bullish technical signal.
At the same time, the stock's 12-day EMA (the black line) has finally gotten the upper hand on the 26-day EMA (the gold line). That's also bullish, but this signal is somewhat muted because both lines remain below the zero-bound.
All in, this is starting to look like a technically bullish chart -- although enough technical issues persist to remain cautious.
An Options Option
Options traders who are bullish but risk-averse might be using a bull-call spread here rather than buying Oracle equity itself.
That's where you buy one call and sell another with a higher strike price, with both expiring on the same day. Here's an example:
-- Long one ORCL call with a $152.50 strike price and a March 13 expiration (i.e., after the earnings date). This cost about $9.80 at recent prices.
-- Short one ORCL March 13 $167.50 call for roughly $4.20.
Net Debit: $5.60.
This trader is risking the $5.60 net debit to try to bring in $15, for a $9.40 maximum theoretical net profit. The trader will receive this if ORCL trades at or above $167.50 at expiration.
Conversely, the trader is risking the $5.60 next debit, which is this trade's maximum theoretical loss. A trader will suffer that if ORCL trades at or below $152.50 at expiration.
Oracle's Fundamental Analysis
ORCL plans to report quarterly numbers after the bell on Tuesday, with the Street looking for $1.71 of adjusted earnings per share on $16.9 billion of revenue. That would represent a 16.3% gain from the $1.47 in adjusted EPS that Oracle saw in the same period last year, as well as 19.6% y/y sales growth.
However, analysts' forecasts seem to be moving in both directions on ORCL's upcoming earnings.
Fourteen of the 31 sell-side analysts that I can find who cover ORCL have cut their earnings estimates since the latest quarter began, while just 11 have raised their numbers. (Six have left their forecasts unchanged.)
A look back at Oracle's fiscal Q2 results released in November shows that the firm generated $2.066 billion in operating cash flow during that period.
That said, the company spent $12.033 billion on capital expenditures during the period, leaving free cash flow at a minus $9.967 billion.
But almost incredibly, Oracle still paid out $1.435 billion in cash dividends to shareholders during the period. That left Oracle with a $19.8 billion cash position and $34.4 billion of current assets at fiscal Q2's end.
Meanwhile, the firm's current liabilities added up to $37.8 billion as of fiscal Q2's close, including $8.1 billion of shorter-term debt and $9.9 billion of deferred revenue (which isn't a true financial obligation).
That means that Oracle's headline current ratio stood at 0.91 as of the quarter's end. That rose to 1.16 once adjusted for those deferred revenues.
For those who don't already know, a company’s current ratio is a measure of financial health should a firm need to liquidate for whatever reason.
The equation is simple -- current assets divided by current liabilities. Typically, a current ratio of 1.0 is considered the bare minimum for adequacy.
Oracle's Technical Analysis
Let's look at ORCL's chart going back some six months and running through Wednesday afternoon (March 4):
Readers will first notice a large falling-wedge pattern of bullish reversal running from about mid-October until today. This pattern appears to be possibly closing.
In fact, Oracle has already moved above the pattern's upper trendline and is trying to take its 21-day exponential Moving Average (or "EMA," marked with a green line above). That's the stock's apparent upside pivot for now, and it's also where the swing crowd could get involved.
At the same time, Oracle's 50-day Simple Moving Average (or "SMA," denoted by a squiggly blue line) isn't all that far away -- $172.30 in the chart above vs. ORCL's $152.96 close on Friday.
Meanwhile, Oracle's Relative Strength (the gray line at the chart's top) has steadily improved, although it remains weak.
Similarly, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) has firmed up as well.
For instance, the histogram of Oracle's 9-day EMA (the blue bars) has been in positive territory for almost a month. That's a bullish technical signal.
At the same time, the stock's 12-day EMA (the black line) has finally gotten the upper hand on the 26-day EMA (the gold line). That's also bullish, but this signal is somewhat muted because both lines remain below the zero-bound.
All in, this is starting to look like a technically bullish chart -- although enough technical issues persist to remain cautious.
An Options Option
Options traders who are bullish but risk-averse might be using a bull-call spread here rather than buying Oracle equity itself.
That's where you buy one call and sell another with a higher strike price, with both expiring on the same day. Here's an example:
-- Long one ORCL call with a $152.50 strike price and a March 13 expiration (i.e., after the earnings date). This cost about $9.80 at recent prices.
-- Short one ORCL March 13 $167.50 call for roughly $4.20.
Net Debit: $5.60.
This trader is risking the $5.60 net debit to try to bring in $15, for a $9.40 maximum theoretical net profit. The trader will receive this if ORCL trades at or above $167.50 at expiration.
Conversely, the trader is risking the $5.60 next debit, which is this trade's maximum theoretical loss. A trader will suffer that if ORCL trades at or below $152.50 at expiration.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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