Shares of Oracle (ORCL) are down 12% so far in Tuesday morning’s trading session even after the company posted first-quarter earnings that beat the consensus. The problem? The dismal guidance for the second quarter ahead.
Oracle has benefited as more and more companies rush to claim their stake in the AI marketplace. The demand for its cloud services burgeoned for the quarter, leading to a 13% boost for cloud services and license support revenues to $9.5 billion.
In terms of revenue, the company reported $12.45 billion, narrowly outperforming the analyst estimate of $12.44 billion. This equates to an EPS of $1.19 compared to the consensus of $1.15. The adjusted operating margin of 41% was a slight improvement from 39% this time last year.
Total revenue should grow at a rate of 5-7% for the quarter ahead, while cloud revenue is actually forecasted to slow down a bit at just 28% growth compared to 29% growth last quarter.
Experts suggest this step backward is contributing to the fall-off we’re seeing in ORCL shares so far today. But, the company expressed that this is just a matter of Cerner accelerating its transition to the cloud. Licenses are recognized upfront whereas cloud subscriptions are recognized relatively.
Whatever the case, one thing is for sure – analysts are underwhelmed. In fact, Goldman Sachs analysts say that this guidance is not good enough in the face of lofty expectations for the company.
But, some analysts like those at Guggenheim remain bullish on the stock. Shares had climbed nearly 12% over the last month leading into today’s news before losing all that growth and then some. Still, ORCL has climbed more than 45% in the past year.
So, where does that leave current or prospective investors? Should you buy or sell ORCL or hold off until the noise settles down a bit? We’ve got 3 things you need to see before you make your next move, which we’ve uncovered through the VectorVest stock forecasting software.
While ORCL Has Good Upside Potential and Very Good Safety, its Timing is Poor
The VectorVest system tells you what to buy, when to buy it, and when to sell it - eliminating human error, guesswork, and emotion from your trading strategy. It’s all based on a proprietary stock rating system that relies on three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on a simple scale of 0.00-2.00, with 1.00 being the average. This allows for quick and easy interpretation - but it gets even better. Because based on the overall VST rating for a given stock, the system issues a clear buy, sell, or hold recommendation - at any given time. As for ORCL, here’s what we found:
- Good Upside Potential:The RV rating offers a comparison between a stock’s long-term price appreciation potential (forecasted three years out) and AAA corporate bond rates and risk. As for ORCL, the RV rating of 1.19 is good. And, the stock is slightly undervalued right now with a current value of $115.76.
- Very Good Safety: The RS rating is an indicator of risk. It’s derived through an in-depth look at the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. And right now, ORCL has a very good RS rating of 1.30.
- Poor Timing: The issue right now is the negative price trend that has gripped the stock today, sending shares 12% lower. The RT rating of 0.75 is poor. It’s based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year
The overall VST rating of 1.09 is considered fair for ORCL, but where does that leave you as an investor? A clear buy, sell, or hold recommendation is just a click away - get a free stock analysis today and make your next move with complete confidence and clarity!
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VectorVest advocates buying safe, undervalued stocks, rising in price. After beating earnings yet falling short of the expectations for the current quarter guidance, shares of ORCL fell 12%. But despite poor timing, the stock does have good upside potential and very good safety.
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