Oracle Shares Are Cheap, but Are They a Good Value?

Brief Summary:

This article suggests that a slump in Oracle's (ORCL: sentiment, chart, options) share price has created a buying opportunity for investors, despite lingering concerns about a decline in corporate software spending. The equity's 19% loss during the past year has turned ORCL "into both a value stock and also one of the last growth stories left standing in tech," according to the author.

While the company's solid balance sheet leaves it well-poised to grow by snapping up cheaper, smaller rivals, the article also cites respectable growth projections. ORCL is expected to "increase sales 5% this year and next, and profit may grow 9% this year and 8% next year." This better-than-average outlook should motivate some investors to overlook the potential downside catalysts of slowing software sales and a strengthening U.S. dollar, says the article.

Contrarian Takeaway:

On the charts, there's not much to like about ORCL. As Joseph Hargett recently noted, the stock is battling resistance from its 10-week and 20-week moving averages. The shares are also resting heavily on support at the 15 level, which could eventually give way under continued pressure.

Meanwhile, there's a glut of bullish sentiment surrounding the stock. Its Schaeffer's put/call open interest ratio (SOIR) checks in at 0.57, just 4 percentage points from an annual peak of optimism. Plus, during the past 10 days, traders on the International Securities Exchange have bought to open more than twice as many calls than puts on ORCL.

Analysts also love this stagnant stock. Zacks reports 13 "buy" or better ratings, compared to just 5 "holds" and no "sells." Considering ORCL's lackluster price action, some of these upbeat brokers could issue downgrades during the short term.

If the equity continues to flounder beneath resistance, the bullish contingent on Wall Street could grow frustrated and close out their optimistic bets. ORCL shares might be cheap at current levels, but the contrarian analysis indicates that the stock could definitely get cheaper during the near term.