Oracle stock analysis: is it time for a correction?

Oracle is consolidating in an uptrend

Oracle logo on its HQ in Silicon Valley                                 
Oracle's Q1 earnings came in just short of analyst's expectations on Monday, but its adjusted earnings beat their estimates.
                                

Oracle reported its financial first-quarter earnings on Monday. Its revenue of $9.73bn (£7.02bn) fell short of analysts’ estimates of $9.77bn, according to Refinitiv. However, Oracle’s adjusted earnings of $1.03 per share beat analyst estimates of 97 cents per share. 

The company’s guidance for the second quarter was for expected revenue growth of 3% to 5% and earnings of $1.09 to $1.13 per share. The analysts polled by Refinitiv expect revenue growth of 5% and adjusted earnings to come in at $1.08 per share.

The revenue from Oracle’s largest business segment, cloud services and license support, increased 6% to $7.37bn but was marginally below analysts’ estimates of $7.4bn. 

Oracle’s CEO, Safra Catz, told the Q1 2022 earnings conference call: “Cloud is fundamentally a more profitable business compared to on-premise, and as we look ahead to next year, we expect company operating margins will be the same or better than pre-pandemic levels.” 

However, analysts believe Oracle will face stiff competition from Microsoft’s and Amazon’s cloud services. Dan Ives, an analyst at Wedbush Securities, told Bloomberg: “It continues to be a bit of an uphill battle for Oracle battling Microsoft and Amazon in this cloud arms race.”

The consensus analyst price target for Oracle, according to Yahoo Finance, is $88.89. Could Oracle stock go up and hit triple digits? What do the charts project? Read our ORCL stock analysis to find out.

Oracle share price technical analysis: weekly chart

Oracle share price technical analysis: weekly chart
Oracle share price technical analysis: weekly chart

Oracle’s stock price has been in a strong uptrend, rising from its May 2020 lows of $39.75 to hit a high of $91.67 in August of this year. Both moving averages are sloping up and the relative strength index (RSI) is in the positive zone, indicating advantage to buyers.

For the past few weeks, the stock has been trading in a tight range, suggesting that traders are waiting for the next trigger. If bulls drive the price above $91.67, the stock could reach the psychological mark of $100.

On the downside, the 20-week exponential moving average (EMA) is likely to act as a strong support. If the price rebounds off this level, it will suggest that sentiment remains positive and traders are buying on dips. 

A break and close below the 20-week EMA will be the first sign that supply exceeds demand. That could pull the price down to the 50-week simple moving average (SMA). 

Oracle share price technical analysis: daily chart

Oracle share price technical analysis: daily chart
Oracle share price technical analysis: daily chart

Oracle’s stock price has been consolidating between $91 and $86.63 for the past few days. Although bulls pushed the price above this range on 17 August, they could not sustain the higher levels. This suggests that bears are defending the overhead resistance aggressively.

The 20-day EMA has flattened out and the RSI has slipped close to the midpoint, indicating a balance between supply and demand. 

If bears sink and sustain the price below $86.63, it will suggest that bears have overpowered the bulls. That could open the doors for a decline to $82 and then $77.

On the other hand, the advantage will tilt in favour of the buyers if the stock breaks and closes above $91. That could open the gates for an up move to $100.

Oracle: stock buy or sell at these levels

Oracle’s share price analysis shows the stock is trading inside a tight range. The next trending move may start after the price escapes this range. If the breakout happens to the upside, a rally to $100 is possible. Conversely, a break below the range could pull the price down to $77.50.

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision.

Trade Oracle stock: Oracle shares price

Oracle
Daily change
87.16
Low: 86.23
High: 87.68
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