Software's Rising Tide Floats Oracle's Boat

NEW YORK ( TheStreet) -- If the stock price of Oracle ( ORCL) and his paycheck are any indication of Larry Ellison's wealth, he should have no problem paying for the upkeep of his fleet of world-class yachts.

In the past year, he received about a $15 million dollar paycheck in addition to seeing his holdings in the stock go up about 15%. Good earnings projections have seen the stock go up about 8% last month as is evidenced in this hourly trading chart provided by Barchart:

The stock is even outperforming the market and while the market, as measured by the Value Line Index, is up 1% over the past six months, Oracle is up about 6%:

Oracle makes software, hardware and related services for businesses, including database and database management, application servers and cloud applications. The company was founded in 1977 and is headquartered in Redwood City, Calif.

Factors to Consider

Barchart technical indicators:
  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Trading above its 20-, 50- and 100-day moving averages
  • Nine new highs and up 8.40% in the last month
  • Relative Strength Index 63.84%
  • Barchart computes a technical support level at 30.54
  • Recently traded at 31.63 with a 50 day moving average of 28.70
  • Fundamental factors:
  • Widely followed on Wall Street where 34 brokerage firms have assigned 43 analysts to churn out recommendations for clients on this stock
  • Analysts project revenue will increase by 4.70% this year and another 6.70% next year
  • Earnings are estimated to increase by 8.10% this year, an additional 9.80% next year and continue to increase by 11.64% annually over the next five years
  • These consensus numbers resulted in 10 strong buy, 21 buy, 12 hold and no under perform or sell recommendations to clients
  • If the numbers are correct analysts predict investors could see an annual total return in the 14%-to-18% range over the next five years
  • The balance sheet gets a solid A++ rating
  • TheStreet staff gives the stock an a A- rating
  • The P/E is 13.07 which is actually lower than the 14.80 P/E of the market
  • The .78% dividend rate is only about 12% of projected earnings and well below the market dividend rate of 2.40% -- think growth not income
  • Short interest has spiked up lately but if the stock's climb continues a rush to buy to cover could make the price go even higher
  • The company is a leader in software for cloud computing and the handling of Big Data -- even during a recession you can't skimp on data management if you expect to compete
  • The company is managing its balance sheet very well during the world wide recession
  • Investor interest:
  • I measure professional investor interest by how many brokerage firms cover a stock and individual investor interest by how many readers on Motley Fool have the stock on their watch list and they are 3,628 that gave a 94% vote for the stock to beat the market
  • Some brokerage firms recommending hold or better are RBC, JPM Securities, Barclays Capital Management, Oppenheimer and recently Zachs
  • Since Jim Cramer gave a thumbs down signal back in December the stock has climbed 9.16% -- sorry Jim
  • The market has been kind to the software sector in the past year and while Oracle was up 15%, Microsoft ( MSFT) was up 18%, SAP ( SAP) up 20% and VMWare ( VMW) up 8%:

  • TheStreet rating of B
  • Revenue projected to increase by 9.10% this year and 6.60% next year
  • Earnings estimated to be up 11% this year and 10.60% next year
  • SAP
  • TheStreet rating of B+
  • Revenue projected to be up 13.60% this year and 10.90% next year
  • Earnings estimated to increase by 12% this year and 13.90% next year
  • VMWare
  • TheStreet rating of B
  • Revenue projected to be up 21.80% h=this year and 18.70% next year
  • Earnings estimated to increase by 24.40% this year and 16.70% next year
  • Conclusion: The whole software sector is a good place to be. Oracle's recent price increase means if you want to get on board do it immediately before the short interest start to cover; by then it might be too late. Carefully monitor the moving averages and turtle channels to signal when the move is over:

    This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.