If the company's fiscal fourth-quarter earnings release on Thursday shows strong results, the company's stock price should jump. Oracle is one of the best moneymaking bets in this overvalued broader market.
But investors wonder if strong earnings would be enough to help the company ride out its legal storm. Oracle has been entangled in several legal hassles that pose a constant threat to its reputation.
For starters, the company recently lost a bitter patent fight with Alphabet's Google.
Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells GOOGL? Learn more now.
In addition, Oracle is a defendant facing Hewlett-Packard spin-off Hewlett Packard Enterprise in a more than five-year-old battle. If Hewlett Packard Enterprise emerges victorious in this $3 billion lawsuit, it would be a big blow for Oracle.
Meanwhile, the cloud is crucial for Oracle because it needs to show that its repertoire of applications and database products put it ahead in converting customers to the cloud. Cloud computing hit a quarterly sales run rate of $700 million in the fiscal third quarter, while gross margins were nearly 80%.
Any unfavorable news from Oracle's cloud division could prove extremely harmful to the company. Unfortunately, a former senior finance manager is suing Oracle, claiming that she was terminated in retaliation for complaints about accounting practices in the company's cloud services business.
This whistle blower's complaint was followed by a shareholder suit against Oracle, accusing the company of making "materially false and misleading statements regarding the company's business, operational and compliance policies."
If Oracle is investigated by the Securities and Exchange Commission and found guilty of malpractice, its share price would tumble, but that looks unlikely.