Where Oracle Stock Could Be Headed Next

Year-to-date, ORCL sports an over 38% lead

Dec 23, 2021 at 12:08 PM
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The shares of Oracle Corporation (NYSE:ORCL) are inching lower today, last seen down 0.2% at $89.68. The software concern has taken a nosedive on the charts over the past couple of weeks, despite news it is in talks buy electronic medical records provider Cerner (CERN) for $30 billion. The $89 mark seems like it could contain this pullback from a Dec. 10, all-time high of $106.25, however. Plus, ORCL sports a 38.8% year-to-date lead.

ORCL

The brokerage bunch remains skeptical of Oracle stock. Of the 18 analysts in question, 13 carry a tepid "hold," while the remaining five call it a "strong buy." Meanwhile, the 12-month consensus target price of $102.64 is a 14.3% premium to ORCL's current perch.

The options pits echo that pessimism. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.05, which sits higher than 89% of readings in its annual range. This means near-term put open interest outweighs call open interest by a wider-than-usual margin.  

From a fundamental point of view, Oracle stock does not offer long-term security or growth potential. Aside from holding a relatively weak balance sheet, with $46.55 billion in cash and $87.01 billion in debt, its valuation also sits on the higher end. The security trades at a price-earnings ratio of 25.35, and a price-sales ratio of 7.44, which are both excessive given ORCL's growth rate in recent years.

What's more, Oracle's revenues are up just 4% since 2018, after it experienced back-to-back years of annual revenue declines in 2019 and 2020. ORCL's bottom-line growth is extremely inconsistent, despite an impressive net income increase of 168% since 2018.

Nonetheless, ORCL’s forward price-earnings ratio of 21.79 indicates that the company is expected to continue to see an increase in earnings in the coming year, perhaps making Oracle stock an opportunity for short-term traders.

 

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