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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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3.8 stars on average, based on 311 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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

Goldman Sachs: Even a $7.50B Fine Can’t Take Them Down

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Last week, Goldman Sachs Group Inc. (NYSE: GS) published its Q4 earnings report, in which the main financial indicators exceeded all analysts’ expectations.

The net profit amounted to $2.54B, well above expectations of $1.78B; the revenue reached $8.12B compared with a forecast of $7.5B; finally, the net interest income rose to $898M versus an expected $758M.

The chart shows that Goldman Sachs’ revenues always exceeded the forecast figures. In 2017, the forecasts were quite conservative, with the actual results not much different. In 2018 this bias was already smaller. Based on the data from the chart, one can conclude that 2018 was not the best year for the bank, with revenues falling as predicted, which led to a share price fall, too. Over 2018, the stock lost almost 45% of its value.

Early in the year, the stock was still near the historical highs; then, after the Q1 report release, the price went down, as the report showed worse figures than expected.

Now, the price is increasing sharply, bouncing off its lows. Investors tend to first pay attention to the expected figures, especially if the company has been operating in the market for a long time. In such situations, news has a short-term impact on the price, as this has may times stood the test of time. Goldman Sachs was no exception.

The news on the Malaysian scandal, which broke out in 2015, is still here to stay. The Malaysian authorities accuse bank representatives of bribing officials to get an order for bond placement in 2012-2013. The revenues from those bonds, i.e. $6.5B, were just taken away, without any hint on using them for the local investment. In response, Goldman Sachs pointed out that the bonds were placed for the purpose of raising money for Malaysia, but instead part of the funds was stolen by members of the Malaysian government. As it turned out, the then Prime Minister of Malaysia, Najib Razak, was indeed found to have $681M in his accounts. This was a dead end, however, and indeed officials were very unlikely to punish themselves. Now, when Razak lost the election, the new government launched an anti-corruption investigation and Najib Razak was accused of money laundering, while Goldman Sachs was also charged.

In mid 2015, the stock actually declined, which lasted about a year. Overall, the fall was 37%, but then Goldman was out of the Malaysian scandal and media spoke about corruption in the Asian country. Meanwhile, in Malaysia, people knew very few things, as the media was tightly controlled by the government, and those who dared to report it were immediately closed. As such, The Insider, a Malaysian media, was closed after the very first publication of the article hinting on government corruption.

Therefore, linking the stock decline to the scandal does not work. However, if you follow the chart of the company’s revenues, you’ll understand what really happened.

The chart shows that the revenue forecast for the second quarter of 2015 was already declining, and when the Q2 real income was less than the previous one, both the stock and the prediction went down. Thus, the price directly responded to the decline in forecast indicators for revenues, and the news factor here had virtually no effect on the stock.

In 2016, the stock started recovering with the expectations also going higher. Therefore, the current growth in the value of the stock is directly related to the expectations of the growth of Goldman Sachs earnings in Q1 2019.

As for the possible fine, David Solomon, the Goldman Sachs CEO, decided to play it safe: the bank has already started accumulating money for it.

Technically, on W1 the stock is quite weak, being under 200-day moving average, but in spite of this, there’s still an uptrend, as the MA is going up.

When the stock fell down to its lows at $160, the volume increased drastically, which is one of the most evident signs of a reversal. This will be further confirmed once the 200-day MA gets broken out and the price stays above. But since the price went up sharply from its lows and increased for 4 weeks in a row, a small correction may happen as well.

The price may bounce off the 200-day MA and fall back to $190, after which the rise may resume.

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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4.6 stars on average, based on 26 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Analysis

AMD: Time to Find the Bottom

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By Dmitriy Gurkovsky, Chief Analyst at RoboMarkets

With the crypto hype nearly over, it’s time to see what’s happening with graphic board manufacturers. When demand boomed, their earnings burst, and so did the stock prices. Currently, however, the demand is down, and this is clearly seen in the earnings reports. While previously the earnings reached rather high numbers, they are bound to start shrinking now. What is important here is whether the management at such companies used the large capital inflows to take the companies’ performance to the next level.

Today, we’ll take a closer look at Advanced Micro Devices, known as AMD. We could also consider Nvidia (NASDAQ: NVDA), but its stock is seven times more expensive than AMD’s, which means it is much less available to the retail investors.

AMD earnings had risen by 2,200% when the crypto boom was at large, while Nvidia added 1,500% to its value. At the same time, when AMD shares were at the low, they cost around $1.50, which was quite alright for retail traders, while Nvidia shares were 15 times higher.

Advanced Micro Devices (NASDAQ: AMD) is a major GPU and chip set manufacturer. The company hasn’t had any production facilities of its own since 2009, and uses other companies’ facilities. Among AMD’s partners, one may mention Acer, Cisco, Dell, Ericsson, Fujitsu, HP, IBM, NEC, Nokia, Siemens, and Sony.

The major competition of AMD is Nvidia. In 2010, AMD was better than Nvidia, when its market share amounted to 51%. It was actually in 2010 when the first Bitcoin transaction was made. This was the jump start for the cryptos and, eventually, for mining devices.

By 2018, the crypto market cap reached its high at $840B, followed by the fall that has so far reached $119B. This caused a high demand for used GPUs, while the demand for new devices fell; this eventually led to the falling AMD sales. Investors booked their profits, and AMD shares fell, too. The earnings will continue going down, and the company will have to distract the investors from this.

The forecast for earnings in the coming quarter is not positive either, which means the stock has not reached its bottom yet.

AMD: What Happened Recently

In October, the Q3 report came in, with both the earnings and the ROI rising YoY. The operational profit went up to $150M, while the net profit rose by 70% to reach $102B. However, even with the earnings rising (mostly due to the CPU sales), the stock went down by 22% just because GPU sales shrank. When this happened, Deutsche Bank, Mizuho, and Morgan Stanley cut their forecasts regarding AMD share price.

In November, AMD partnered with Amazon to supply Epic CPUs for Amazon data centers. This pushed the price by 9% in the short term. Another price spike happened in December, when the 90-day ‘cease-fire’ was achieved in Sino-US trade wars; this was perceived as positive news for tech companies, and, in particular, pushed the AMD price by 7.50% upwards.

After that, the rise was over, and the shares were falling for 20 days in a row. The last hope was the Radeon IIV GPU release, which was presented at the CES expo on January 9, 2019. The stock started to recover but then went down abruptly.

This whipsaw may continue for long. What one may do is pay attention to the next quarter forecasts and do the tech analysis, while also watching the current and past events.

As such, some figures may show AMD’s strong points.

Thus, the equity ROI is 28.44%, with the overall industry number being at 11.84%; the profit margin is 5.05% versus 2.06%. On Dec 20, 2018, AMD was added into NASDAQ 100. Every year, the amount of data to process is increasing, while making the CPUs and GPUs smaller gets more and more difficult. This is likely to increase the demand, and, subsequently, increase AMD earnings, too.

On the dark side, AMD is not currently paying any dividends, while the P/E is 49.50 versus the 14.85 industry average, which means the company is well overpriced. The forecasts for the next quarter earnings are negative, which may put the AMD shares under pressure, too.

Thus, AMD shares may shrink in the short term, but in the longer term, they look quite attractive for investment. In order to understand where the price is going to ‘take off’, one should use tech analysis.

On W1, the price is above the 200-day SMA, which means there is an ascending trend. Fundamentally, however, the price may get lower, perhaps finding its support at the 200-day SMA.

The secondary support levels are at $10 and $15. $15, the nearest one, is very likely to get broken down, as it is quite far from the SMA. If the sellers get more active, the price may head further lower to reach and even break out $10. However, the odds are that the breakout will not continue for long, and a recovery will follow immediately. Thus, $10 may be considered a good level for taking long positions.

On D1, $22 is a currently strong level. In case it does not get broken out soon, it may become then a starting point for the price to start heading towards $10.

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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4.6 stars on average, based on 26 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Stock Picks

Stock Pick: Starbucks Corporation (SBUX)

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Starbucks Corporation (SBUX) is one of the most popular coffee and tea companies in the world. The company founded in Seattle markets, roasts, and sells specialty coffees and teas to retail consumers. In addition to the Starbucks coffee chain, the company also owns and operates popular brands such as Seattle’s Best Coffee, Teavana, and Tazo. As of June 2018, Starbucks Corporation has a workforce of 277,000 employees and sales of $23.5 billion in fiscal 2018.

Technical Analysis of Starbucks Corporation (SBUX)

For over three years, the stock range traded between $47.40 and $61.40. While many stocks printed new all-time highs during this period, SBUX was stuck in sideways trading. This changed in November 2018 when the stock took out resistance of $61.40 with an above-average move. The price action ignited a rally to a new all-time high of $68.96.

While the stock has been pulling back since, something tells us that SBUX will likely generate a fresh ATH in the next few months.

Technical analysis shows that SBUX successfully flipped resistance of $61.40 into support. This happened early this month as the stock completed the retest of $61.40. The price action is bullish. It tells us that the market is ready to trend higher.

On top of that, we can see a golden cross between the 50 MA and the 100 MA on the weekly chart. The crossover sets up the ideal MA alignment where the 50 MA is on top of the 100 MA and the 100 MA is above the 200 MA. This setup indicates that the market’s uptrend remains healthy.

Fundamental Analysis of Starbucks Corporation (SBUX)

In addition to our technical analysis, fundamental analysis also backs our bullish view.

The most recent quarterly earnings report of the company beat expert estimates. Q4 earnings data reveal that SBUX posted an adjusted earnings per share of 62 cents versus expert estimate of 60 cents. It also surpassed expert projection of $6.27 billion in revenues as the company generated $6.3 billion. Lastly, the company printed global same-store sales of 3% as opposed to analysts prediction of 2.35%.

On top of the impressive Q4 earnings, the stock’s trailing twelve months price-to-earnings ratio (PE ratio TTM) stands at 26.27. It is still undervalued considering its five-year maximum is 39.60. This tells us that market participants are ready to pay a premium for SBUX shares. Along with the technical setup, it appears that SBUX has some upside potential.

The strategy is to buy on dips as close to $61.40 as possible. As long as bulls hold this level, SBUX will likely generate the momentum to rally to a new all-time high of $70.

The timeline for the target is less than six months.

Weekly SBUX Chart

Monthly SBUX Chart

As of this writing, the Starbucks Corporation stock (SBUX) is trading at $63.57.

Summary of Strategy

Buy: On dips as close to $61.40 as possible.

Target:  $70

Stop: Close below $59.

 

Featured image courtesy of Shutterstock.

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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3.8 stars on average, based on 311 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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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