Oracle’s upbeat quarter fails to excite investors: should you buy the pullback?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jun 16, 2021
  • Oracle’s fiscal fourth-quarter results beat expectations on revenue and earnings Tuesday after markets closed.
  • The stock has since created a downward price gap after falling sharply on Wednesday.
  • ORCL looks relatively undervalued. Should you buy the pullback?

Oracle Corporation (NYSE:ORCL) shares plunged on Wednesday morning after announcing its fiscal fourth-quarter results on Tuesday evening. The stock created a downward price gap to trade at $75.96 per share, down from Tuesday’s highs of about $82.70. 

Oracle outperformed analyst expectations on revenue and earnings, but the upbeat performance still failed to excite investors. The stock now trades at exciting valuation multiples, making it a good option for value investors.

Why ORCL pullback could be an opportunity to buy

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Oracle reported strong growth across several segments of the business. Fusion ERP business segment grew 40% in the most recent quarter at the back of the 30% growth reported in Q3. The company’s Fusion Human Capital Management unit sales increased 35% in Q4, again posting higher growth than the 23% in Q3. Oracle’s NetSuite segment was up 24% in Q3 and 26% in Q4, while Gen 2 Cloud Infrastructure, including Autonomous Database, more than doubled on a Y/Y basis. 

Oracle’s current stock price of about $75.96 values the stock at a P/E ratio of approximately 16.75. The forward P/E ratio of about 14.85 is even more compelling, making ORCL shares an exciting option for investors. Oracle also trades at a forward dividend yield of 1.57%, which should boost shareholder confidence.

Source – TradingView

Technical overview

Technically, ORCL shares have plunged to the oversold levels of the 14-hour RSI in the 60-min chart. It indicates a significant shift in the market sentiment from bullish to bearish. The pullback pushed Oracle’s stock price to the 100-hour moving average creating an opportunity for a rebound.

Investors can target short-term rebounds at about $79.62 and $82.68. On the other hand, investors looking to short ORCL shares and capitalize on the downward momentum can target profits at approximately $74.05 and $71.15.

Bottom line: ORCL shares look poised for a rebound after the pullback

In summary, Oracle posted significant growth in some of its leading business segments. The Q/Q improvements will also be a compelling feature for investors. The stock price crossed to oversold levels after creating a downward price gap. It now looks likely to bounce back after finding support from the 100-hour moving average.

Therefore, ORCL looks like an exciting short-term buy ahead of the rebound. Wednesday’s pullback could be an opportunity to own one of the best cloud stocks in the market.

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