Oracle is a wise trade
Posted
Sep 15 2009, 09:09 AM
by
Minyanville
Rating:
This article is written by Minyanville's Glenn Curtis
Wednesday after the close, Oracle (ORCL) is due out with first-quarter numbers. And I think this a decent time to belly up to the big-name California-based company. Here's why -- in no particular order:
1. I generally don’t like to chase stocks, but I think the fact that it's trading right near its 52-week high may turn out to be a positive. I suspect it will capture the hearts of momentum folks (retail and institutional), and as a result, this ball may continue to bounce.
2. As far as the first-quarter numbers are concerned (the estimate is currently $0.30), I believe it will beat by $0.01-$0.04. Ellison and crew know the score and the importance of meeting/exceeding expectations. And given the bounce-back in the share price, they’d all but wrestle a bull to make sure folks out there are left with a big grin after the first-quarter numbers are made public. Of course, its recent history raises my optimism, too: It's beaten expectations the last two quarters straight and in three of the last four quarters.
3. It's hard not to like its earnings potential in the near future. Note that it trades at around 14.9 times this year’s estimate, which is $1.53 right now. That’s pretty as a peach because the company is essentially expected to grow its EPS in the low double digits from this year to next. The fiscal 2011 estimate is $1.69. (I guess I should also give a shout out to International Business Machines (IBM) -- a sweet deal at about 12.1 times this year’s estimate.)
4. The insider purchases north of $22 in and around the July time frame were a pretty good sign. It's also interesting that I could pick up the stock at just a little higher level and be almost in the same boat as people that arguably should know more about the company than anyone.
5. I guess we'll see what happens with the Sun (JAVA) deal. But I still feel there could be a catalyst there and am hoping management has a little something to say about the situation when it releases the first-quarter numbers.
In sum, I'm sweet on Oracle, both in the short term and for the long run. I also think that dipping a toe in the water right now sounds pretty good, given the company’s recent knack for topping expectations.
I’m particularly enthused that this behemoth is currently expected to generate strong growth from this year to next, never mind what I see as the wild card in Sun.
Hey, have a great day!
No positions in stocks mentioned.
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