Michael Fowlkes' Analyst Insights
Options and ETF Analyst Writer
Oracle to post third-quarter earnings March 19
3/17/2018 11:54 AM
Software maker Oracle (ORCL) will release its fiscal third-quarter results after the market close March 19. The consensus calls for earnings of $0.72 per share, up from $0.69 during the same period last year. The stock is currently up 12.6% on the year.
ORCL was recently trading at $52.50, just $0.98 below its 12-month high and $8.90 above its 12-month low. Overall technical indicators for ORCL are bullish and the stock is in a strong upward trend. The stock has recent support above $51.00, and recent resistance below $53.50. Of the 28 analysts who cover the stock, 19 rate it a “strong buy”, one rates it a “buy”, and eight rate it a “hold”. ORCL gets a score of 79 from InvestorsObserver’s Stock Score Report.
ORCL has been somewhat erratic over the last six years, but overall the stock has trended higher, and is currently trading just shy of its 52-week high. The stock took a hit after the company’s last quarterly report, which offered a weaker than expected outlook for the most recent quarter. The company has done a good job converting its customers over to its cloud-based software packages, but the weaker than expected outlook spooked the market into wondering if its cloud growth would continue as strongly as previously forecast. The street is expecting a slight earnings beat, with a whisper number of $0.74 versus the consensus $0.72. An earnings beat will definitely keep strength in the stock, but the company’s forward statement, and signs of cloud strength will be the true drivers of the stock following the report.
Stock Only Trade
If you're looking to establish a long stock position in ORCL, consider buying the stock under $52.50. Sell if it falls below $47.25 or take profits if it gets to $60.50.
If you want a bullish hedged trade on the stock, consider a May 42/47 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (37.0% annualized*) and the stock would have to fall 9.9% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider a May 57.50/60 bear-call credit spread for a $0.25 credit. That's a potential 11.1% return (64.3% annualized*) and the stock would have to rise 10.0% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a May $55 covered call. Buy ORCL shares (typically 100 shares, scale as appropriate), while selling the May $55 call for a debit of $51.65 per share. The trade has a target assigned return of 6.5%, and a target annualized return of 38.2% (for comparison purposes only).
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