Oracle Corporation Pre-earnings Analysis
Chart done on hourly timeframe. Oracle shares are up more than 100% since their 2022 lows, but have struggled to breakout higher over the past 52 weeks as earnings growth plateaued. The company’s surge from its lows in 2022 was due to their ability to grow revenue by 18% that year, however 2023 proved to be more of challenge in terms of revenue growth. Despite the flat revenue growth, the company did post profit growth so their leadership is doing a good job at increasing their profit margins and reducing operational costs, but the question is if that’s enough to move the needle. Oracle’s stock valuation has grown to a massive 346B, and their price to earnings ratio of 32x, above the healthy range of 15-25. There are two ways in which Oracle can correct its price to earnings ratio to a healthier level; either they increase profit margins, or their stock sells off to a lower valuation. Analysts are expecting the company to post quarterly earnings of 1.34 per share, up from last quarter, but flat from a year ago. Which means that despite the company’s efforts in artificial intelligence, they’re still expected to plateau once again.
Oracle’s stock performance in the coming quarters will highly depend on what they post these earnings. The company’s range over the past 52 weeks will likely soon be broken, the direction will be based on their future guidance and projections.
Option chain analysis:
ORCL’s option chain expiring on July 19 2024 currently reflects an implied volatility reading of 35%, which translates to about a $11.71 move from the underlying stock between now and then. The direction of that move will depend on their earnings outcome and call.