Oracle (ORCL) Falls 11% on Weak Revenue, But There Are Still 2 Reasons to Hold Onto This Stock

Oracle (ORCL) delivered second-quarter earnings after the market closed Monday, and the results sent shares lower in extended trading. They picked up from there this morning when the bell opened and the stock fell 11%.

The software company fell short of expectations for revenue, delivering just $12.94 billion compared to the consensus of $13.05 billion. This was a 5% improvement year over year, though.

Chairman Larry Ellison said that there is no cause for concern as demand for the company’s cloud infrastructure products is already massive, and yet, continues to climb. Oracle is building 100 more cloud data centers to keep up with “billions of dollars more in contracted demand than we currently can supply”. 

This was reflected in the earnings report upon digging deeper, as the company reported a 12% growth in cloud services and license support revenue for the quarter. That being said, revenue suffered just about everywhere else. Hardware, cloud-license and on-premise-license, services, and more were all down for the quarter.

The company did see an improvement to its bottom line, raising net income from $1.74 billion last year to $2.50 billion this year. The adjusted earnings per share of $1.34 narrowly outperformed the FactSet consensus of $1.33.

Looking ahead to the third quarter, Oracle is expecting EPS to fall between $1.35 and $1.39 with revenue growth between 6%-8%. This is mainly in line with analyst expectations, which are slated for earnings of $1.37 and revenue growth of 7.5%.

Despite the slight step back in revenue, Oracle remained optimistic on the earnings call. The stock’s performance this past year has been nothing short of impressive, up 28% in that timeframe. 

All things considered, now is not the time for ORCL investors to sound the alarm. In fact, we found 2 things for investors to be optimistic about in looking through the VectorVest stock analysis software.

ORCL Has Poor Timing, But Good Safety and Very Good Upside Potential

VectorVest simplifies your trading strategy through a proprietary stock rating system that tells you what to buy, when to buy it, and when to sell it. You’re given all the insights you need to make confident, calculated decisions in 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT).

Each sits on its own scale of 0.00-2.00 with 1.00 being the average. You’re then given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. As for ORCL, here’s what we’ve discovered:

• Very Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (based on a 3-year price projection) to AAA corporate bond rates and risk. As for ORCL, the RV rating of 1.36 is very good. The stock is undervalued right now with a current value of $127.82.
• Good Safety: The RS rating is an indicator of risk derived from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other risk factors. ORCL has a good RS rating of 1.23 right now.
• Poor Timing: The one thing holding ORCL back right now is the negative price trend pushing the stock lower. The stock has a poor RT rating of 0.75. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 1.12 is good for ORCL. It is currently rated a HOLD in the VectorVest system - but we encourage you to get a free stock analysis today to learn more and stay up to date on this opportunity, which is constantly evolving!

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VectorVest advocates buying safe, undervalued stocks, rising in price. ORCL is falling after revenue fell short of expectations in the 2nd quarter, but the company says there is no cause for concern. The stock may have poor timing, but it does have good safety and very good upside potential.

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