Our Analysis of Oracle Corporation (ORCL)

Every Tuesday at HX Daily, we analyze one of the US stock market's biggest and most widely owned companies.

We analyze these companies using our “Quantamental” approach.

We have developed this analysis process over the last three decades, and it is a quick way to analyze the stock's potential.

As a reminder, our "Quantamental" analysis is not a formal stock recommendation but a quick analytical tool to give an initial view of a stock in the short and intermediate term.

Since starting this process in July, we have analyzed many of the largest companies in the S&P 500.

We recently completed our analysis of the ten largest companies by market capitalization in the S&P 500. Last week, we reviewed cloud-based software company Salesforce, Inc. (NYSE: CRM), and this week, we analyzed another software giant recently in the news – Oracle Corporation (NYSE: ORCL).

This Austin, TX-based company was co-founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates as the Software Development Laboratories or SDL. Ellison was inspired to create a database company based on a paper he read discussing relational database management systems he read in the IBM Research Journal.

Over the years, the company has purchased several other software companies, including PeopleSoft, Siebel, BEA Systems, and Sun Microsystems, to build one of the largest software companies in the world.

Today, the company employs more than 160,000 people globally and will generate more than $60 billion dollars in revenue this calendar year. It is also currently the 26^th largest company in the S&P 500.

Here is the analysis…

1. Technical Analysis

The company held its initial public offering (IPO) on the NASDAQ in 1986.

From the original IPO price of $0.065 (split-adjusted), the stock recently traded at an all-time high of $190 per share. That is almost a 300,000% return since originally going public. This has made it one of the most successful technology companies of all time and made Larry Ellison one of the wealthiest people in the world.

Here is the chart of the stock over the last decade…

The stock is up almost five-fold over the last decade. It has done exceptionally well in the last few years, with a big run-up this year, as it had nearly doubled in just 2024.

The strength of the shares and the new high are evident when you look at the chart for the last year. Here is that chart along with the relative strength index or "RSI” …

You can see on the chart that up until recently, the stock was soaring and hit a new intraday all-time high just last week when they reported earnings. As the market digested that report, the shares began to sell off and have traded lower for most of the week.

This has brought the stock down to mildly oversold levels, with the RSI now below 40.

Despite being oversold, the stock is still quite extended from its 100-day and 200-day moving averages. It is not as extended as it was, but the stock is still up a lot.

We like that the stock is a clear “winner” recently and over the long run. It has strong investor support and attention.

From a short-term tactical perspective, however, it is approaching an interesting level. At this point, from a technical perspective, we would hold off on buying the stock.

TECHNICAL ANALYSIS = AVOID

2. Earnings Revisions

Our readers know that we think the strongest driver of near-term stock price performance is whether companies beat numbers and see positive earnings revisions.

We refer to them as “earnings” revisions, but they can also be revenue revisions. We usually look at not only the most popular measure - earnings Per Share (EPS)but also other measures, such as Earnings Before Interest, Depreciation, and Amortization (EBITDA).

Like most well-established companies, the EPS numbers are the most widely followed at ORCL.

Here is a chart of the stock price versus the fiscal year 2025 EPS estimates for the company…

The green line represents earnings estimates, and the earnings numbers have not moved much for ORCL over the last few years.

Given the performance of the stock price, this is surprising to us! Almost always, share prices follow earnings revisions, which is an exception to the norm and also concerns us.

Our experience is that these eventually line up, which could be a risk for the stock.

The company also doesn’t have the best track record of beating numbers on the quarterly reports. Here is how their reports have lined up over the last few years relative to analysts’ expectations…

The company has a decent track record of beating numbers, but the last few quarters have been a little light. This is likely why the earnings revisions haven't been great.

Again, we are surprised at how well the stock has done, given these numbers. That makes us uncomfortable, and we would prefer to own companies that beat numbers, especially when the stock price is up so much.

On the basis of the earnings revisions for ORCL, we would avoid the stock right now.

EARNINGS REVISIONS = AVOID

3. Earnings Growth

The final measure we focus on is the actual growth in earnings.

While earnings revisions drive a stock higher in the short term, earnings GROWTH drives a stock higher in the long term.

In our INVESTING strategies, we are looking for companies that are going to grow EPS from $1 to $10. If you can find those stocks, you can make a LOT of money.

Here is the table for the EPS results of ORCL over the last ten years…

This data is also surprising to us relative to the stock price performance. The company has grown earnings over the year but not by much, especially relative to the move in the stock price.

The growth is fine, but we are uncomfortable owning a stock that is up a lot and does not have significant growth.

EARNINGS GROWTH – AVOID

Conclusion

ORCL attracted our attention on the back of the earnings report and the big move up in the stock in 2024.

While the stock has been a "winner" over the years, we are surprised at the company's lack of operating momentum.

We think that investors have massive respect for management and what the company has done over the years, which has helped the shares.

We can't argue with the stock price results, but compared to our analysis of the larger companies in the stock market, ORCL has one of the weaker track records. As a result, we would AVOID the shares right now.