Oracle stock price forecast: buy or sell before its Q1 earnings?

Oracle stock price has pulled back in the past few weeks, moving from a high of $260 in July to $232 today. This performance could change this week as Larry Ellison’s company publishes its financial results. 

Oracle stock has benefited from the AI boom

Oracle share price has done well in the past few months, helped by the ongoing AI tailwinds. Its stock has jumped by over 97% from its lowest level in April this year. 

The company has become a major player in AI, as evidenced by its participation in Stargate, the $500 billion project in collaboration with Softbank, OpenAI, and MGX. The project will see the company build large data centers in the United States. It recently announced a $30 billion deal with OpenAI.

Oracle has become a major option for companies building artificial intelligence solutions. While its cloud service is smaller than Microsoft’s and Google, it is seeing robust growth in an industry that analysts expect to continue growing in the coming years. Studies expect the sector will have a CAGR of over 17% by 2030.

The most recent results showed that Oracle’s remaining performance obligations (RPO) rose by 41% in Q4 to $138 billion. The Q4 revenue jumped by 11% to $15.9 billion, while the infrastructure as a service (IaaS) revenue rose by 52% to $3 billion. 

Its cloud application (SaaS) revenue rose by 12% to over $3.7 billion. Oracle’s revenue and profits are growing. Its net income jumped by 22% to $3.4 billion. 

Wall Street is optimistic, but valuation is a major concern

Analysts anticipate that its revenue will continue to do well in the first quarter. The average revenue is expected to come in at $15 billion, up by 13% from the same quarter. The most optimistic analyst predicts revenue will rise to $15.48 billion. 

Most importantly, analysts expect the second quarter revenue will rise by 15% to $16.2 billion. The annual revenue will be $66.62 billion and $79 billion in the next two financial years. 

Oracle’s revenue growth has coincided with the rising profits. The earnings per share is expected to come in at $1.48, up from $1.39 in the same period last year.

The main concern about the Oracle stock has become more expensive than Nvidia. It trades at a forward price-to-earnings (PE) ratio of 47, much higher than the sector median of 30. Its forward PEG ratio is 2.45. In contrast, NVDA’s metrics are 38 and 0.99, respectively. 

Oracle is also expensive, even with its rule-of-40 metrics. Its forward revenue growth of 16% and its net income margin of 21% gives it a rule-of-40 multiple of 37%.

ORCL stock price technical analysis

The daily timeframe chart shows that the ORCL stock price pulled back and bottomed at $218, the strong pivot reverse point of the Murrey Math Lines.

It has remained above the 50-day and 100-day Exponential Moving Averages (EMA). Its Relative Strength Index (RSI) has continued rising in the past few weeks.

Therefore, the stock will likely continue rising as bulls target the year-to-date high of $260.80, which is slightly above the ultimate resistance level at $250. 

A move above that level will point to more gains , potentially to the extreme overshoot level of $281. A move below the support at $210, the 100 EMA will invalidate the bullish outlook.

Read more: Oracle stock price crashes as we predicted: 16% dive possible still

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