ebook essays pieces of the puzzle
Thursday, December 22nd, 2011
an oracle stumbles

No, not the one in Omaha.  Oracle (ORCL) the stock.

Given that it has been a good performer for a number of years, I was amazed to see that the price of ORCL is still only a bit more than half of what it was in September 2000.  (Dividends started in 2009, so the total return comparison is only marginally better.)

In any case, the company missed expectations when it announced its quarter after the close on Tuesday.  The top panel shows the stock price relative to the average target price — a “metric,” by the way, of which I’m not a fan, but there it is.  The next panel displays the progression of earnings estimates for this fiscal year and next.  Expectations for long-term growth are about 15%, so those with a head for math can see that it would be favored by those who like PEG ratios — hey, I’m not a fan of that either. Of course, these aren’t GAAP earnings, so they look better than they really are.  (I’m not a fan of that practice, but I haven’t written about it, so no link.)

The bottom panel gives key historical growth rates and you can see that they have been contracting.  Guidance for year-over-year growth in sales for the upcoming quarter is 1-5%.

Speaking of expectations, there were a couple of analyst downgrades to go with a bunch of reductions in target price and earnings estimates after the company made its announcement.  However, 34 of the 44 analysts listed on Bloomberg kept their buys — and only two say sell — for what it’s worth.  (Chart:  Bloomberg terminal.)