Two schools of thought exist for Oracle Corporation (NYSE:ORCL) ahead of its second-quarter earnings report. On one hand, you have the innovative corporate spirit underlining ORCL stock. Some of the biggest names in industry utilize Oracle applications to manage and administrate their business. On the other hand, Oracle hasn’t done much for the past half-year period.
If you’re dim on the software technology firm, the markets aren’t persuading you to think differently. Although the ORCL stock price is up 30% year-to-date, since June 22, shares have quite literally not moved at all. That sends a worrying signal to investors that Oracle’s best days are behind them.
Keep in mind that the ORCL stock price isn’t the most stable barometer. In 2016, company shares returned a rather pedestrian 8%. In the year prior, Oracle tanked heavily. Similar to co-founder Larry Ellison’s behavior, you just never know what you’re going to get.
With all that said, stakeholders also have reasons to be optimistic heading towards the upcoming ORCL earnings. For starters, Oracle has always been on the cutting edge of technology. Relative to many other firms in the broad tech sector, they embraced the Software-as-a-Service (SaaS) model. Now, they’re a serious contender in that game, as they demonstrated in last year’s Q4 ORCL earnings report.
More importantly for the ORCL stock price, management is pushing cloud computing even further. For them, it’s not just about SaaS. Rather, they want to push both the platform and the infrastructure to the cloud. This concept is best demonstrated with their recent AT&T Inc. (NYSE:T) deal, which combines the physical infrastructure, access to Oracle’s database, and the software application under one umbrella.
Oracle has never been shy about their innovations, but will it be enough for the upcoming ORCL earnings?
Quiet Optimism for the Q2 Oracle Earnings Report
For Q2, consensus estimates peg ORCL earnings per share to hit 68 cents. This is slightly near the lower end of the spectrum, which ranges from 67 cents to 70 cents. However, it’s a fairly substantial step higher from the year-ago quarter, when Wall Street forecasted a 60-cent EPS. Actuals came in at 61 cents.
On the revenue front, analysts expect Oracle to haul in $9.6 billion. This is smack in the middle of the estimate range, which runs from $9.5 billion to $9.7 billion. In comparison to the prior-year quarter, which brought in $9.1 billion, management is optimistic about their chances.
Much will hinge on the company’s SaaS revenue stream, as well as their Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) businesses. If recent ORCL earnings performances are anything to go by, Oracle has a great shot of producing a beat.
Currently, ORCL stock is riding a four-hit winning streak. Historically, Oracle loves the second quarter. Going back to at least Q2 of fiscal 2015, the company has managed to pull off an earnings beat.
Moreover, market participants seemingly like their chances as well. Since Dec. 5, the ORCL stock price is up more than 3%. Adding to that bullish speculation are rumblings in the options market. According to a recent CNBC report, “Over the past week more than 3,500 calls at the Dec $51 strike price have been bought.” Since these are out-of-the-money options, traders will need to see a solid gain for the position to be profitable.
Long-Term Potential for ORCL Stock Is Bright
Traders aren’t always right with their gambles. I’m not even sure if they’re usually right. And the cloud computing market is incredible crowded, featuring major competitors like Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN). But given the overall circumstances, investors can likely expect another beat for ORCL stock.
The SaaS-PaaS-IaaS represents Oracle’s triple threat. By bringing all the potential of cloud computing under one ecosystem, clients save significant money. Obviously, it attracted AT&T and it will certainly attract other whales. In addition, this triple threat allows scalability for smaller fishes and minnows. As this new approach grows, so should the ORCL stock price.
Finally, I think you have to respect the company’s integration of artificial intelligence into their latest Oracle Database 18c. With this new tech, Oracle became the first provider of an autonomous cloud network. As TipRanks writer Harriet Lefton writes, “The cloud eliminates human labor, human error and the need for manual tuning.”
The ORCL stock price has unfortunately become a tale of two stocks this year. The first half featured tremendous promise, and the second half reneged on that promise. Naturally, investors are perplexed as to the next direction. Ultimately, the company’s fundamental strengths should shine through. A positive ORCL earnings report would go a long way.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.