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Stock Pick: Oracle Corporation

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Oracle Corporation (ORCL) is a company that specializes in developing database software and technology as well as cloud engineering systems and enterprise software products. In terms of revenue in the software-making industry, Oracle comes second to Microsoft with sales figures reaching up to $39.83 billion in 2017. Also in 2017, the company had over 138,000 employees serving 430,000 customers in 175 countries.

Technical Analysis of Oracle Corporation (ORCL)

ORCL started its bull run in June 2009 when it took out resistance of 20.00. This triggered the inverse head and shoulders reversal pattern on the daily chart. Since then, the stock has been generating a series of higher highs and higher lows in a predictable manner.

A quick look at the charts of ORCL reveal a strong and sustainable uptrend. The stock climbs until the monthly RSI flashes overbought readings. It then retraces until it drops near or at RSI support of 30 – 40 on the weekly chart. The process has been repeated numerous time in the past nine years. There’s no indication that the uptrend will be over soon.

Technical analysis show that ORCL has taken out resistance of 46.00. This triggered a small cup and handle reversal structure on the weekly chart. However, a closer look at the monthly chart reveals that 46.00 resistance stood for 18 years. This explains why the stock struggled for a year to stay above it. Fortunately, ORCL has recovered the territory as it recently managed to spark a rally to 48.

Furthermore, technical indicators are showing bullish signals. The weekly MACD recently flashed a bullish cross. Plus, the weekly RSI bounced from support of 40. Also, the 4-day, 8-day, and 21-day moving averages are trending up.

Weekly ORCL Chart

Monthly ORCL Chart

As of this writing, the Oracle Corporation stock (ORCL) is trading at 48.46.

Fundamental Analysis of Oracle Corporation (ORCL)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. ORCL’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 56.35. The stock appears overvalued. However, it has a five-year maximum of 64.60. This tells us that investors are willing to pay a premium for ORCL shares.

In addition, CNBC reports that Oracle’s quarterly results beat expert estimates. Analysts predicted that the company would generate revenues of $11.19 billion and a profit of 94 cents per share. However, Oracle posted revenues of $11.25 billion and an earnings per share of 99 cents.

The strategy is to buy on dips as close to 46.00 as possible. If bulls can stay above this level, it’s all blue skies for ORCL. There’s no known resistance above 46.00.

Initial target is 56. However, the stock could go as high as 82 in the long-term.

The timeline for the initial target is three months. The target of 82 may take more than a year.

Summary of Strategy

Buy: As close to 46 as possible.

Target: 56 first and then 82.

Stop: Close below 44.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.6 stars on average, based on 222 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Stock Picks

Stock Pick: Twitter Incorporated

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Twitter Incorporated operates a popular social media platform that enables users to post and engage with messages known as tweets. In addition, the social media channel offers promoted products and services which include promoted trends, promoted accounts, and promoted tweets. These features allow advertisers to endorse their products and services. The company has 3,372 employees with 2017 revenues amounting to $2.44 billion.

Technical Analysis of Twitter Incorporated (TWTR)

TWTR moved as high as 74.73 in December 2013. Unfortunately for buyers at that level, the stock went into a freefall after it hit that price level. The downtrend began in March 2014 when TWTR breached support of 50. Bulls mounted multiple attacks to take out the resistance, but each attempt was denied. With bears in full control of the market, the stock dropped to as low as 13.91 in February 2016.

At that price level, TWTR formed a solid base. The base building continued until October 2017 when the stock surged in price and volume. The price action was a signal that the stock was ready for a bull run.

Technical analysis show TWTR broke out of a rounding bottom reversal pattern on the daily and weekly charts. The breakout looks valid as it was pushed by heavy volume. On top of that, the stock climbed as high as 47.79 in June 2018.

Recently, TWTR has been correcting. Nevertheless, this may be an opportunity to buy the dip.

Fundamental Analysis of Twitter Incorporated (TWTR)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. TWTR’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 62.63. The stock appears overvalued. However, it has a three-year maximum of 333.4. This tells us that investors are willing to pay a premium for TWTR shares.

In addition, Variety reports that Twitter’s quarterly results beat expert estimates. Analysts predicted that the company would generate revenues of $605 million and a profit of 12 cents per share. However, Twitter posted revenues of $665 million and an earnings per share of 16 cents.

The strategy is to buy on dips as close to 30 as possible. If bulls can stay above this level, then we might see TWTR climb to 39.80. This point is crucial because by then, the stock would have created an inverse head and shoulders pattern. We’ll revisit TWTR once the target is hit for the possibility of a breakout.

The timeline for the initial target is less than three months.

Daily TWTR Chart

Weekly TWTR Chart

As of this writing, the Twitter Incorporated stock (TWTR) is trading at 32.98.

Summary of Strategy

Buy: As close to 30 as possible.

Target: 39.80

Stop: Close below 28.40.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.6 stars on average, based on 222 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Tesla: Even Record Losses Cannot Stop the Stock’s Growth

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By: Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets.

About two weeks ago, we published an article on Tesla and its future prospects, but today we will talk about this company once again.

On August 1, Tesla reported on second-quarter financials. The results are sad – the losses of the company are topping record levels.

The second-quarter losses reached $718 million USD, and compared to Q2 2017 they have gone up more than two times. If we look closer at the dynamics of what is currently happening, we will see that the growth of the losses is gradually slowing down and, at the same time, the overall income of the company is growing.

From this perspective, the future looks quite bright – if it goes on like that, the company will very soon be able to become profitable. As a result, amid the growing losses, the price of Tesla’s stock has increased by more than 20%. Here, the situation is exactly the opposite with regard to that of Facebook, whose share price has fallen by 20% despite massive profit growth. Tesla investors have paid attention not to the growing losses, but to the promises of Elon Musk to reach profitability in the next two quarters of the year.

Share prices have been pushed higher by another growth accelerator as well, which may later lead to an even bigger increase in price.

The short float ratio for Tesla shares is 27.38% and it demonstrates that every third investor is going short. Such an impressive growth has naturally provoked the closing of short positions. According to some reports, the losses of the bears on Tesla shares reached $2 billion USD last week, and many have not completed their transactions yet hoping for the price to pull back in order to reduce the present losses. But if the decline does not follow, they will again become “clean buyers”, pushing the stock price further up.

Tesla presents a unique case for Wall Street; if we analyze its financial indicators, we will see that one absolutely should not invest in a company with such a high short float ratio.

Let us compare Tesla with Ford – one of the leading car manufacturers in the world. The capitalization of Tesla is already 1.5 times bigger than that of Ford.

The ratio of debt of capital for Tesla is 2.42, meanwhile the same ratio for Ford is even worse – 4.19. This being said, the profitability of Ford is 4.30% and that of Tesla is in the minus and amounts to -18.80%.

Despite positive quarterly results, Ford shares cannot form an ascending trend and are trading at $10 USD. The decline had been forecast even before the reports on Ford shares were published in the article in June.

At the same time, amid the growing losses, Tesla stocks are in an uptrend.

There are 23 times more outstanding shares of Ford than those of Tesla. If, in this situation, we divide the price of Tesla shares by 23, the result will be that one share costs about $15 USD. In other words, even in the case of such comparison we see that the shares of the company are overpriced, and if we add up the debts and profitability, it will become clear why Tesla’s short float ratio is so high.

However, there is one more detail that the company had concealed when the report was published. In the second quarter Tesla has moved over to a new income report standard of ASC 606 which has provokedartificial revenue growth. When the growth of the revenue was being compared to the same in the Q2 2017, the values have not been adjusted according to the new rules and it has not been indicated that the calculation has been made according to the old standard. Thus, the company has misled investors by this data and it does not seem possible to calculate the real growth of the revenue in the second quarter, as Tesla has not published any detailed information on the adjustments which had influenced this report.

If we look at the diagram at the beginning of this article, we notice the positive dynamics of  revenue. But if we look closer, we will see that the situation is completely different – the revenue values have in fact been inflated, while it is impossible to calculate the real values at the moment. It turns out that only the third-quarter report will reveal the real dynamics of Tesla’s revenue. As of yet, only the fact of the growing losses has been confirmed. On the basis of this information, at the moment of the publication of the statistics not everyone understood what these numbers reflect. This is why the demand for Tesla shares has grown so sharply.

In light of this, it would be logical if investors reconsider the situation and begin unloading Tesla shares. But, historically, shares of Tesla have long ago stopped being governed by logic, which is why the sellers can once again experience losses. Along with them, there will be more ill-wishers which are predicting an imminent collapse of Tesla and are trying to persuade everyone to sell their Tesla shares. Possibly, their predictions will become reality one day – the only question is if they will be able to cover the losses, which they have experienced from such a long wait.

If Tesla shares are not governed by logic, then what is the growth accelerator? The answer is banal – rumors and expectations. Elon Musk has promised that the company will become profitable during the next two quarters of the year (although he always promises something). Tesla is now setting all its expectations at Model 3 and the huge demand for it.

We cannot ignore the talent of Elon Musk either. He is not only a great inventor but also a good seller. Perhaps, it is only his persuasiveness that makes investors believe that the future is bright for Tesla and stimulates them to further invest. Currently, the company produces 5,000 electric cars a week and is planning to be producing 6,000 by the end of August.

The technical analysis still indicates that there is an uptrend and that the probability of the further growth of the price of the shares is high. The price is above the 200-day moving average and it has bounced off the support level of 300 USD. The closest resistance is at 400 USD.

Disclaimer!

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 6 rated postsHaving majored in both Social Psychology and Economics, Dmitriy went on to continue his education in post graduate. He then worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped him to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. Dmitriy is a pro in the financial field who authors articles for various international media. He also holds the position of Chief Analyst at RoboMarkets.




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Analysis

Is Facebook Doing Really That Badly?

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Founded by Mark Zuckerberg in February 2004, Facebook (NASDAQ:FB) is the world’s largest social network. On Thursday, after the earnings report, Facebook stocks went down by almost 20%; the company’s revenue was higher compared to the previous quarter, but the report did not meet expectations. In fact, this happens quite often, but before it did not lead to such plunges. Let’s find out what caused such as a massive selloff. In order to understand it, we’ve got to analyze the major negative events around Facebook since its IPO in 2012.

In June 2013, evidence came that ANB had been gathering information on its users, including their messages and location. The community well understood that such things are common on the web, although companies don’t tend to declare it openly, so that’s why Facebook stocks did not react to this news at all.

A month later, Facebook published a report saying the company had received over 25,000 requests to clarify data collection from 38,000 users; these reports had come from various governments since January 2013, and over 50% of them were accepted and processed. In this case, the market did not show any negative reaction either. In fact, it was quite the reverse, as shares skyrocketed by 26% in June, after the earnings report, and continued rising in August.

In May 2016 Facebook was accused of pubic opinion manipulation, as there was interference in the news algorithm by company employees. The news selection editors were then fired, and new automated algorithms were brought in to replace them; those were criticized afterwards too, though.

Facebook was also accused of intellectual property infringements, unethical attitude towards users, spam, and illegal data processing, but none of these pieces of news could do well enough to prevent the stock from growing. It looked like investors were okay with the company not caring about the ethics, as long as it acquired more users and its profits were high.

In 2018, the Cambridge Analytica scandal, where Facebook was again accused of illegal data processing, triggered a 23% drop in share prices.

In 2015, Aleksandr Kogan created his thisisyourdigitallife app, where he got information on 50 million Facebook users, which he then submitted to Cambridge Analytica that afterwards used them in the US presidental elections.

The UK and the European Parliament then requested data protection information from Zuckerberg, while the US Federal Trade Commission started its own investigation. The stock plunge led to serious losses in the case of some investors, and those issued a legal action against Facebook saying the company had been aware of the data leak but had not taken any appropriate measures and had not admitted it in public.

Of course one can understand why Facebook management feared doing so. Trump was then the synonym of ‘Russian spy’, with Russia being accused of interference in the US elections. If Facebook had admitted Cambridge Analytica had been able to influence the elections, it would have been a suicide.

However, as time passed, the scandal was no longer in the minds of investors. Combined with the Trump rally, US stocks were surging again.

Unfortunately for Facebook management, the scandal did its job a bit later. Rumor had it that some dissatisfied investors were planning to make Zuckerberg resign, although it never was easy, as he was both the Executive Director and the Board Chairman.

Right after that, the UK government announced they were going to fine Facebook $663,000. While this won’t influence the financial state of the company, it was feared that similar measures would be taken by European Parliament and US Congress, where the amounts may significantly higher.

It did not take long for the European Parliament to respond, indeed, as on May 25, the famous General Data Protection Regulation (GDPR) came into effect. This regulation imposed stricter rules of data collection and using them without users’ knowledge. Any GDPR infringement may cost the company 4% of its yearly revenue.

Facebook is headquartered in Dublin, so many of its users (except for US and Canadian citizens) are now governed by this law. In fact, from over 2.0 billion users registered on Facebook, 1.9 billion are under the EU jurisdiction, which makes GDPR a very important issue for the company.

It appeared that Aleksandr Kogan, who created that thisisyourdigitallife app,submitted the data to Cambridge Analytica just let Facebook down. While the data had been always collected this way, this time they were used illegally, which led to those new restrictions.

GDPR is a strict rule, but it does not completely forbid companies from gathering information on users; currently, users are asked at sign whether they agree to submit their data, and in case they don’t, they just won’t be able to log in. So, in fact, nothing has changed much, except for the European Parliament getting the opportunity to fine companies for the new regulation infringements.

So, here’s what we finally have: the scandal did not influence Facebook itself, but led investors to panic. They may even claim their loss through a legal action again, which is quite a common thing in the US. The first action was actually already issued by a certain James Kakuris on July, 27.

Meanwhile, the financial state of Facebook, Inc. needs analyzing to make this puzzle more complete.

Over the last three years, the company’s earnings increased quarter to quarter. Q1 is always a bit of lackluster each year against Q4, but this is quite understandable, as consumer demand increases before Christmas, and the advertisers tend to sped more money.

Among all earnings reports, there was only one when Facebook did not meet expectations. This time, earnings reached $13.23 billion, while the expectations were at $13.36 billion.

If we take all the emotions out and leave only the figures, we’ll see the revenue increased by 42%, the number active users went up by 11%, and ad revenue skyrocketed y 91%, QoQ.

The number of daily users increase is indeed somewhat lackluster, but this is mostly because of the GDPR. Besides, Facebook is reported to have reached its maximum active user number for now and is trying to ‘recruit’ users in other locations, where internet usage isn’t as active. However, the total number of users is at 4 billion for now, which means there is still some more room for growth.

In November 2018, the US will be electing Congress; for Facebook, this means they will have to spend more on security and controlling the damage of the data leak, whether the management wants it or not. This is why the costs are expected to grow by 50% in Q3, which will lead to the revenue going down in both Q3 and Q4.

The bottomline: the company still looks healthy and good for investing, but the quarterly earnings will be going up slower than they used to. Besides, in the lights of the recent fall, more negative news may appear, and this may be pushing prices downward. For now, it may be feasible to just watch how it goes and be ready to buy Facebook low, if this is possible.

Technically, the shares are trading below the 200-day SMA. It was the same after that Cambridge Analytica scandal, but then the price consolidated around the support at $150 and $160, and then went up, with volumes growing during the SMA breakout, which became an additional bullish signal.

This time, the price may well consolidate again before moving directionally, after which investors will be finally able to predict where exactly it will go.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 6 rated postsHaving majored in both Social Psychology and Economics, Dmitriy went on to continue his education in post graduate. He then worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped him to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. Dmitriy is a pro in the financial field who authors articles for various international media. He also holds the position of Chief Analyst at RoboMarkets.




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