Oracle Corporation (NYSE: ORCL)
After the close Wednesday, Oracle Corp (ORCL) reported better than expected Q1 earnings per share, 53 cents versus estimates of 52 cents, however, this was overshadowed by lower than expected sales of $8.4 billion versus estimates of $8.54 billion. ORCL’s cloud revenue was lackluster as they look to catch up to bigger players in the field like SalesForce (CRM) and as a result of the weak sales JP Morgan lowered its price target from $38 to $37 and Stifel Nicolaus cut its price target to $45 from $47. Shares sold off in the extended market session, opening down 3.99% from Wednesday’s close of $38.27. ORCL blamed the weak revenues and software license growth on the stronger dollar from business done abroad. The Board of Directors also declared a quarterly cash dividend of $0.15 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on October 14, 2015, with a payment date of October 28, 2015.
“We are still on target to book between $1.5 and $2.0 billion of new SaaS and PaaS business this fiscal year,” said Oracle Executive Chairman and CTO Larry Ellison. “That means Oracle would sell between 50% more and double the amount of new cloud business than salesforce.com plans to sell in their current fiscal year. Oracle is the world’s second largest SaaS and PaaS company, but we are rapidly closing in on number one.” Investor Relations
ORCL will need to prove its ability to increase its revenues and growth in the cloud business in order to get this stock price turned around which is going to be tough so long as the dollar remains strong.
Shares sold off in the post market session when ORCL announced Q1 earnings and opened down at $36.74 to start the day. Shares quickly rebounded to intraday highs of $37.67 on short positions being covered before returning to the downward move. Technicals are looking bearish too as moving averages are all starting to point south along with the Relative Strength Index that’s currently sitting at 44.92, inching its way down. Next level of support looks to be coming in at the $36 and $36.50 range while resistance will be met at $37.50 and $38 range.
Looking at the daily on the year for ORCL, you will see that most of the year has been spent consolidating between the $45 and $41.50 price levels before breaking lower and beginning a new down trend. A Death Cross happened in the middle of July and ever sense then it has kept creating lower lows, eventually bottoming out at $35.14, a 22% drop from the $45.33 high at the beginning of the year. As of the close today at $38.27, ORCL is down 18.4% on the year, underperforming the S&P 500 by a wide margin. ORCL has been a relatively weak stock all year and without any strong catalyst to get this stock moving in the other direction, I wouldn’t even consider it for the long side.
About Oracle Corporation
Oracle Corp. provides enterprise software and computer hardware products and services. The company is organized into three businesses: Software and Cloud, Hardware Systems and Services. The Software and Cloud business operates through the following segments: New Software Licenses and Cloud Software Subscriptions, Cloud Infrastructure-As-A-Service and Software License Updates and Product Support. The New Software Licenses and Cloud Software Subscriptions segment includes database, middleware and application software licenses, as well as its Oracle cloud software-as-a-service and platform-as-a-service offerings. The cloud infrastructure-as-a-service segment provides deployment and management offerings for its software and hardware and related IT infrastructure. The Software License Updates and Product Support segment provide customers with rights to software product upgrades and maintenance releases and patches released during the term of the support period. The Hardware Systems business operates through the following segments: Hardware Systems Products and Hardware Systems Support. The Hardware Systems Products segment provides a broad selection of hardware systems and related services including servers, storage, networking, virtualization software, operating systems and management software to support diverse IT environments, including cloud computing environments. The Hardware Systems Support segment provides customers with software updates for software components that are essential to the functionality of its server and storage products, such as Oracle Solaris and certain other software products, and can include product repairs, maintenance services and technical support services. The Services business offer services solutions to help customers and partners maximize the performance of their investments in Oracle technology. Oracle company was founded on June 16, 1977 by Lawrence J. Ellison, Robert Nimrod Miner and Edward A. Oates and is headquartered in Redwood City, CA. MarketWatch