Oracle: Almost Multi-Year Highs Into Earnings (ORCL)

September 20, 2007 by Douglas A. McIntyre

Shortly after today’s close we will see earnings from the king of enterprise-wide software leader Oracle Corp. (NASDAQ:ORCL).  This will be one of the key results to watch, and with shares over $20.00 its market cap is over the $100 Billion mark.

Ellison & Co. are expected to have the following results, according to First Call:
AUG-07 Qtr. $0.21 EPS & $4.34 Billion revenues
NOV-07 Qtr. $0.26 EPS & $4.88 Billion revenues
MAY-08 FY   $1.18 EPS & $20.9 Billion revenues.
MAY-09 FY   $1.34 EPS & $23.05 Billion revenues 

Options expire tomorrow and now that the strike prices are in $2.50 increments these are difficult to peg for any real expectations.  September Put & Call options expire for stocks tomorrow as well.  There are over 100,000 contracts listed in the open interest for the closest September call strikes alone, and that represents 10 million shares on a leveraged basis.

The Wall Street analysts with recent calls are still positive now that Oracle has acquired most smaller players in the sector.  It looks like the average price target is just above $23.00.  At $21.00, this trades at 17.8-times Fiscal May 2008 projected earnings and trades at 15.7-times Fiscal May 2009 earnings.  With a $107 Billion market cap this also trades at  5.1-times current year revenue estimates and 4.65-times fiscal 2009 (May) revenues.

The chart on Oracle has actually held up quite well and you might not even know the market was in trouble just 30 to 45 days ago if you looked at Oracle alone. 

It will be interesting to hear tonight how Larry Ellison C& Co. will discuss the impact of virtualization, since this is the next ‘next thing.’

With this one up almost 1% today at $21.00 and the multi-year high being $21.13, this one is going to be tough to call ahead of time.  If this gaps up much at all in after-hours trading and/or tomorrow, literally any holder who has purchased the stock since 2001 to 2002 will be profitable.

Here is our preview from the prior quarter for comparison.

Jon C. Ogg
September 20, 2007