Predicting a Bullish Oracle Trade

Despite recent downgrades, the majority of analysts are still positive on ORCL

Oracle (ORCL), an enterprise software company, reports its fiscal second quarter results after the market closes today, December 18, and it is now time for the company to show that it still has what it takes to move forward.

Ahead of the company’s quarterly report, analysts have forecast earnings of $0.67 per share, or 3 cents better than last year’s results. Oracle has underperformed the broader market in 2013, with the stock appreciating just 4.5% since the beginning of the year, allowing plenty of scope for growth!


Oracle’s recent performance in the earnings confessional has been mixed, compared to analysts’ projections. Over the last two years, Oracle has topped expectations four times but the last three times  the company has been battered after its earnings reports:

  • In March the company outpaced estimates for its earnings, but its revenues came in lower than expected.
  • In June Oracle again ran into trouble after posting earnings that were in-line with analysts’ estimates, but once again falling short in revenues.
  • In its last earnings report, the company had earnings of 47 cents per share, which topped the 44 cents analysts had forecast, but its revenues fell short for the third straight time. Analysts were looking for sales of $8.47 billion, while actual sales were just $8.37 billion. The mixed report led to some initial selling, but the stock has been in an upward trend since that report.

It is now time for a turnaround for Oracle based a lot of positive aspects listed below – which should see the company report earnings that will satisfy today’s recommended options trade.

Why Oracle is Set to Perform

It appears that the recent analysts activities regarding Oracle have been too harsh – with Morgan Stanley downgrading shares of Oracle from an overweight rating to an equal weight rating and analysts at RBC Capital downgrading shares of Oracle Corp. from an outperform rating to a sector perform rating – particularly when taking the following positive points into consideration:

  • ORCL is very cheap stock selling for a mere 14.5 times earnings.
  • It’s cheaper still, when valued on its $14.2 billion in free cash flow, and given fair credit for its $15 billion in net cash reserves.
  • Even most pessimistic analysts agree that Oracle will probably be able to maintain 10%-plus earnings growth over the next five years.It continues to pay a respectable 1.4% dividend yield each year.

121813-ORCL-EARNINGS-GROWTHDespite the recent couple of downgrades, the majority of analysts are still positive issuing a “buy” rating on Oracle.

Analysts Anticipate an Upward Momentum

The brokerage bunch is optimistic, awarding 17 ratings of “buy” or better versus 14 “holds” and two “sell” ratings.

Positive news came from analysts at BMO Capital Markets initiating coverage on shares of Oracle Corp. on Wednesday, December 4. They set an outperform rating and a $42.00 price target on the stock. Also, analysts at TheStreet reiterated a buy rating on shares of Oracle Corp. on Tuesday, December 3.


Oracle has continued to build on its current momentum, and if the report today produces strong numbers for its most recent quarter, this will certainly boost the stock price and Oracle will trend higher through the remainder of the year. This allows for a great profit from the recommended options call below…

Buy the ORCL Feb 2014 35.000 call (ORCL140222C00035000) at or under $0.70, good for the day. Place a protective stop limit at $0.28 and a pre-determined sell at $1.50.

As of this writing, Ian Harvey did not hold a position in any of the aforementioned securities. Visit his site,, for a wealth of information that will help you benefit from the exciting and lucrative world of options trading.

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