It's hard to be an oracle, much less on Oracle (ORCL). Yet there traders went again Monday, pushing Oracle stock up nearly a half a percentage point, part of a three-day move to the upside in the prelude to Thursday's earnings report.
Problem is, the coming earnings report can really roll any way. Show me someone who says they have a precise bead on Oracle's first quarter after that confounding fourth-quarter report and I'll show you someone with an outsized sense of their own predictive power.
That's why we're going against the grain and suggesting selling Oracle.
Oracle is, obviously, not a bad company. But over the short-haul, you cannot let expectations get ahead of reality.
About that reality. Wall Street is expecting 51 cents a share, a greater than 13% rise from last year's quarter, but with relatively flat revenues. A point in its favor: Oracle has exceeded expectations in the last two quarters. Though the recent past is not defining, a history of beating is certainly better than the alternative.
But that's where the old standards end.
It's hard to puzzle out what happened surrounding Oracle's fourth-quarter report, because we haven't seen the likes of it. Here's a flashback, because it seems traders have forgotten how strange it was:
"Oracle was getting hit in the rump yesterday on word that a key sales official was leaving. No slouch in changing the subject, Oracle quickly staged a drive-by-conference call to pre-announce their fourth-quarter earnings, which edged expectations."
In that quick pivot between bad news and decent, the stock went up (in the short-run and since, up 15% since the report) ignoring the fact that the company talked down those first-quarter numbers, now due in a matter of days, due to various headwinds. Moreover, they ignored the possibly disruptive news (well-played, Oracle) that Keith Block, in charge of half the company's sales, is gone-and thanks to ill-advised emails that came to light in the Hewlett-Packard (HPQ) lawsuit case.
Is Oracle capable of hitting their reduced numbers? Of course. But between Block's forgotten loss and collective amnesia about Oracle's cautionary stance, as well as their blatant attempt to shift the conversation last quarter by rushing out the earnings, traders should adapt a wait-and-see approach. Anything else is premature prognostication, which never ends well.