Oracle stock has bottomed? Here's what the chart says ahead of earnings

Oracle stock rose by nearly 2% on Thursday as Nvidia boosted the momentum in artificial intelligence (AI) companies. ORCL rose to $149, up modestly from this month’s low of $114. This rally will now be put to the test when the company publishes its earnings earlier next month.

Analysts are turning bullish on Oracle stock

Oracle stock has been in a strong downward trend in the past few months, making it one of the top laggards in the technology space. It has slumped by over 56% from its highest point last year, even as the Nasdaq 100 and S&P 500 indices have soared to a record high.

This plunge happened because of the rising concerns about its exposure to OpenAI and rising debt. Its total debt has jumped to over $129 billion, and the company plans to raise over $40 billion in the form of debt and equity. Its bonds are now trading at near junk category. 

Still, there are signs that investors have become extremely fearful about the company, especially now that there are signs that the AI boom is continuing. One of the signs came from Nvidia, which published strong financial results. Nvidia said that its revenue jumped to $96 billion in the third quarter, or $1.06 billion per day. It also hiked its guidance for the third quarter to $106 billion.

Analysts are slowly turning bullish on the ORCL stock. Citigroup’s Tyler Radke reiterated his buy rating, noting that the company was becoming a bargain. UBS maintained its outperform rating, with Wedbush and Bernstein hiking their targets to $240 and $325, respectively. Moffett Nathanson has a target of $325. 

Oracle earnings will provide more color on its growth

The next important catalyst for the ORCL stock will be its financial results, which will come out in September. Analysts expect the results to show that its revenue jumped by 28% in the second quarter to $19.12 billion. This revenue is then expected to jump by 31% to $21 billion in the current one.

Most of Oracle’s growth are expected in the next few years when its infrastructure buildup starts paying off. The company’s annual revenue is expected to jump by 33% this year to $89 billion, followed by a 46% growth to $130 billion next year. 

Additionally, the company’s earnings-per-share (EPS) is expected to jump to $8.06 this year, followed by $10.93 next year. 

Oracle has also become a bargain, with its forward price-to-earnings ratio moving from 18, lower than the sector median of 22.90. This figure is also lower than the five-year average of 22.

ORCL stock technical analysis

Oracle stock chart | Source: TradingView

Technicals also suggest that the Oracle stock has been in a strong freefall in the past few months. It has formed a large double-bottom pattern at $115.12, its lowest level in April last year and July this year. 

It is also attempting to move above the 200-week Exponential Moving Average (EMA), which would validate the bullish outlook. 

Therefore, the most likely scenario is where it continues rising, potentially to the psychological level of $200, followed by the resistance level at $250, its highest point on June 1. The bullish outlook will be invalidated if the stock drops below the double-bottom level of $115.