Oracle Corporation (ORCL) Shows Strong Growth Potential Despite Overbought Status, 1 month ago

Oracle Technical Analysis

Oracle Corporation (ORCL) closed at $140.38 on June 12, 2024, marking a notable increase of 13.32% ($16.50). The stock hit a new all-time high (ATH) of $140.955, well above its 50-day moving average of $120.21 and 200-day moving average of $114.36, evidencing strong bullish momentum. Volume surged to 40.78 million shares, substantially higher than the average volume of 7.59 million, suggesting heightened market interest and potential continued volatility.

The Relative Strength Index (RSI14) stands at 71, indicating that ORCL is currently overbought. Additionally, with an Average True Range (ATR) of 2.52, volatility remains a key characteristic, which could suggest potential for price swings. The Moving Average Convergence Divergence (MACD) at 1.937115 reinforces the bullish setup, even as the stock trades without a defined resistance level. For the next trading day on June 13, 2024, ORCL may experience some consolidation but is likely to remain strong above the stop-loss level of $135.34.

Fundamental Analysis

Fundamentally, Oracle is robust, reflected by its market capitalization of $385.84 billion. The company has capitalized on demand for AI infrastructure, with recent news affirming strong earnings and partnerships in this fast-growing sector. Oracle's P/E ratio of 37.24, while relatively high, is justified by significant earnings per share (EPS) of $3.77 and optimistic market sentiment. The upcoming earnings announcement scheduled for September 9, 2024, provides a potential catalyst for future price movements.

The stock is relatively undervalued based on its discounted cash flow (DCF) valuation of $101.68, compared to its current stock price. Despite this, market enthusiasm, driven by Oracle's involvement in AI, seems to uphold the elevated price levels.

Oracle Dividend yield is modest at 0.28%, marking it as still attractive to income-focused investors. Oracle's next dividend declaration on July 25, 2024, should sustain investor interest.

Intrinsic Value and Long-Term Investment Potential

Although Oracle's current price exceeds its DCF estimate by a significant margin, the intrinsic value could be higher owing to its strategic engagements in AI. Analysts predict a continued uptrend with target price ranges between $90 and $165. The median target of $132.50, though below the current price, suggests some risk of overvaluation. Still, the broad consensus among analysts remains positive, classifying it as a 'buy'.

Oracle's potential inclusion in the $1 trillion market capitalization club by 2030, spurred by its foray into AI, paints a bright picture for long-term investors.

Overall Evaluation

Oracle Corporation overwhelmingly shows strength both technically and fundamentally, driven by AI integration and robust earnings. Nevertheless, considering its overbought status, overvaluation relative to DCF, and moderate risk of a price correction in the short term, investors could approach with caution in the immediate term.

Given these points, Oracle Corporation stock should be categorized as a 'Hold'. The evaluation balances its current overbought conditions against strong future growth potential in the AI sector and resilient fundamental metrics. This categorization is suitable, awaiting further consolidation and potential re-evaluation post the upcoming earnings release.

Check full Oracle forecast and analysis here.