Oracle Shares Are Bouncing With The Market

Oracle Corporation ORCL shares have risen nearly 10 percent in a week after setting a short-term low last Wednesday.

Is the upside seen in the last week indicative of how terrific the company is doing or was the decline of nearly 20 percent from June until last week the real "tell" for Oracle? Rather than guess, let's take a look at the whole picture for Oracle.

What The Bulls See

• A surface price-to-earnings that appears cheap at 12.
• A reasonable price-to-sales of 4.33.
• Great net profit margins of 28.44 that create more than $12.03 billion in levered free cash flow annually.
• $51.62 billion in cash versus $32.57 billion in debt.
• Debt-to-equity of 67.95 percent and a current ratio of 4.35, both solid.

What The Bears See

• Tepid estimates for 2015 (4.4 percent revenue growth and 8 percent EPS growth) that make the surface P/E of 12 appear not so cheap.
• A market capitalization of $166 billion that easily trumps the enterprise value of $167 billion, also not cheap.
• An expensive price-to-book ratio of 3.53.

Technical Outlook

Technicians note that Oracle shares have bounced violently off of what appears to be a wave "iii" low that was set last week near $35.75. If this is a wave "iv" move instead a new primary wave higher, shares may top out somewhere between $38.50 and $39.57. Any close above $39.57, especially on a weekly basis, will negate the idea of this being a wave "iv" correction to the upside.

Instead, such a close would confirm the more bullish thesis that this is a new primary wave higher and that the stock is destined to at least test out the previous highs at around $43. On the downside, support comes in at last week's lows near $35.75. Below that, the long-term uptrend line comes in at the $34.50-$35 range.