Trader's Edge: Oracle (ORCL)
15-Jun-01 11:31 ET
[BRIEFING.COM - Robert J. Reid] With Oracle having traded down so much recently, Briefing.com believes it creates a good trading opportunity heading into its earnings release after the close on Monday.
Background
Oracle (ORCL 15.21 +0.36) is the world's second largest software company both in sales and market cap behind Microsoft. Its products can be divided into two broad areas: Systems software and Internet business applications software. Systems software is a complete Internet platform to deploy applications on the Internet and corporate Intranets, mostly database management software. Its Internet business applications software allows users to access information through a simple Internet browser on any client computer, and automates specific business data processing functions.
Possible Earnings Outcomes
Nobody is expecting a super strong outlook from Ellison & Co., so we will not discuss it except that the stock would rocket if that were the case. However, with the stock down over 20% over the past two months, a pretty bearish report has been priced in. Also, the Nasdaq has been getting slammed over the past few days so traders are on the hunt for a reason to drive the techs higher. A decent report from Oracle would be just the type of catalyst they are looking for.
If Oracle makes its number or even slightly misses, and management says they see expect a bottom over the next couple of quarters, we would expect a nice pop on the news to the $17/18 range.
Even a so/so outlook could be a catalyst as the sentiment seems is so lousy that an absence of of bad news could drive the shares.
Bottom line, there are a number of possibilities from the Oracle report. But with the stock where it is, the risk/reward looks favorable. We do not expect much downside to the shares regardless of its results on Monday. However, to be safe, we recommend a stop loss limit at $12 to prevent a complete breakdown.
Other Factors
It's a positive sign that Oracle navigated its warning season without issuing a warning which increasing chances for a decent report.
Oracle is hosting an analyst day on June 27. This could also act as a catalyst and it will not have the stain other analyst days have (often these events spark speculation a company will use such an event to warn). But with Oracle having just reported, that will not be an issue.
Yesterday, Oracle unveiled its Oracle9i Real Application Clusters, which provides virtually limitless scalability and total availability for all packaged applications. Oracle has produced the first clustered database software that can run multiple familiar applications -- Oracle E-Business Suite, PeopleSoft, SAP, Siebel. No other vendor's database, including IBM's and Microsoft's, can even run packaged applications using a clustered database on UNIX or Windows. As CEO Larry Ellison fleshes out the benefits of this new product, this could also act as another catalyst.
Please send any comments or questions to rreid@briefing.com. |
