Prophesying Trouble for Oracle
Options News by Better Trades
Ahead of Oracle's (ORCL) Q3 report later this month, several analysts weighed in
with overtly negative expectations for the software giant's latest results.
JMP Securities analyst Patrick Walravens expressed harsh concerns on Oracle's
ability to meet the Street's $1.42/share fiscal year forecast. Walravens now sees
2009 and 2010 earnings of $1.37 and $1.34, respectively. "Our due diligence
suggests that the February quarter was in some respects the worst Oracle has
experience in over 15 years," Walravens stated in a research note to clients.
Walravens cites downbeat outlooks from insiders contributed to his gloomy outlook.
"The tone of the commentary from our industry sources regarding new license
revenue is the worst we have ever heard."
Citigroup analyst Brent Thill slashed his 2009 forecast to $1.40 from $1.44, but
maintained a buy rating on Oracle, citing their ability to outperform the sector
by preserving earnings in a difficult environment.
Peter Goldmacher of Cowen was less pessimistic on Oracle's prospects in affirming
his Outperform rating, but did concede that Q3 results are thus far "coming back
relatively weak."
Last month, Oracle announced it
purchased business software applications vendor mValent. The company expects the
acquisition to close in the first half of 2009.
Founded in 1977 by Larry Ellison, Oracle develops enterprise software using its
flagship databases. Oracle also develops database development tools, middle-tier
software, ERP, CRM, and SCM software.
As of March 4th (With ORCL trading at $15.10), the April $19 puts would cost
$4.10 and would require about a 1% move lower to be profitable. Oracle's Q3
earnings report on March 18th could easily push the price well below that
breakeven if things go as the Street is now projecting.
More so than Wall Street's dim forecast for the Redwood City-based enterprise
software producer, macroeconomic news will continue to weigh on the broad-market.
On Friday, March 6th, the U.S. Department of Labor delivers its monthly Employment
Report. The ADP Employment Report, released on Wednesday, March 4th, projects a
697,000 decline in private payrolls, well above the 522,000 expected drop.
The tech-heavy Nasdaq is down 14% year-to-date as global equity prices unwind.
With the S&P breaking below 700 on March 3rd and Wall Street finding little
resolve in Obama's $787 billion stimulus package, sentiment is still decidedly
negative. Falling home prices, plunging auto sales, and a lack of confidence in
the banking sector paint a bearish backdrop behind investors looking for a bottom.
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