The much-awaited Oracle (ORCL) earnings brought nothing but disappointment due to a higher US dollar and lower Euro. However, the outlook for the share price and therefore for corporate earnings are not as bleak as Larry Ellisson, the Oracle Chairman and founder, explained after the release.
As always, earning releases are two-sided. They show what happened in the past, while minutes after, in a press conference, future plans/strategies are announced. Just like that, what seemed bearish immediately after the release, turned into a bullish price action after Oracle’s press conference ended.
Oracle has invested in its cloud businesses for many years, and it seems that this strategy is starting to bloom. After re-writing software to adapt to the needs of cloud businesses, Oracle is now seeing a hefty increase in that side of their business. The outlook is very promising.
Ellisson actually said that he was being way too modest in appreciating the impact and speed the cloud business will have on the actual revenues of Oracle. He wasted no time in calling out its main competitor in the cloud business Salesforce.com and stated that he expects to top their sales.
The Oracle business is fairly well balanced with current subscriptions bringing a flat amount on a monthly basis, and the new cloud business showing potential for future growth. This makes the NYSE: ORCL shares open to a bullish scenario in the middle/long term, so call options should be considered.
The technical picture is a bit worrying. If you draw a trendline on the six-month data, you’ll see that possible support can only arrive at around the $41.50 level. That should be the striking price for any call option, with a one-month expiration date.
Almost every big player in corporate America is being hit by a stronger US dollar. Ideally, the March FOMC meeting should bring a balanced picture for the US economy and allow the US dollar to consolidate a bit to let these companies see some profit.
A stronger US dollar doesn’t just bring issues however, it should appreciate against its counterparts, like Euro or GBP. This is not boding well for the type of business Oracle is, as subscriptions are becoming more expensive in Euro or GBP terms while the stronger dollar is a headwind for any increase in exports.
Their recent investment in the cloud business should bring NYSE: ORCL a much-needed change in outlook and the stock market should like this. Time will tell.
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