On Friday, Oracle Corporation (NYSE:ORCL) shares rallied more than 13% after announcing its fiscal second-quarter results. The company reported its most recent quarterly results Thursday after the close. Oracle outperformed analyst expectations on revenue and earnings prompting a price hike from Deutsche Bank.
Brad Zelnick upgraded shares to buy from hold, assigning a price target of $120, up from $110. The analyst cited Oracle’s opportunity in the cloud infrastructure market, which could grow at an average annual rate of 30% over the next several years.
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Oracle posted FQ2 non-GAAP earnings per share of $1.21, beating the average for analyst expectations of $1.11. On the other hand, its GAAP EPS of -$0.46 missed expectations of $0.85, while revenue for the quarter increased by 6.1% from the same quarter last year to $10.4 billion, exceeding expectations by $190 million.
Oracle looks undervalued
From an investment perspective, Oracle shares trade at compelling trailing 12-month and forward P/E ratios of 21.40 and 19.51, respectively, making the stock an exciting option for value investors.
In addition, analysts expect Oracle’s earnings to grow by nearly 48% this year before rising at an average annual rate of 8.66% over the next five years.
Therefore, the stock could also be a compelling option for growth investors.
Technically, Oracle seems to have recently spiked to create an upward price gap, escaping from a descending channel formation. As a result, the stock is now trading deep into overbought conditions, thus creating an opportunity for a technical pullback.
Therefore, investors could target potential pullback profits at about $98.27, or lower at $95.65. On the other hand, the stock could rally to retest Friday’s levels at $104.03 and $106.38.
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