Oracle (ORCL) will report earnings 9/13 after the close with the Street consensus at $0.97 EPS and $9.77B in Revenues (+4.3%) and Q2/FY22 seen at $1.08/$10.25B and $4.61/$42.27B. ORCL shares have closed lower six of its last eight reports with an average max move of 8.8%. The $250B Software company trades 17.55X Earnings, 6.8X EV/Sales and 23.4X FCF with a 1.43% yield. ORCL forecasts see revenues growth of 4-5% the next two years, a slower growth name that has moved into faster growth cloud areas while the legacy business weighs on overall numbers. ORCL is a transformation story as they slowly shift their massive legacy on-premise licenses and hardware presence into the cloud and plenty of long-term runway with just 30% converted so far. ORCL recognizes that they’ve been late to the trend but sees a massive opportunity in the multi-trillion dollar public cloud space and while on the enterprise side they can leapfrog peer SAP. ORCL strength has been led by strong growth in Fusion ERP at 27%, NetSuite at 22%, and HCM at 21%. ORCL’s increased investments in sales and marketing as well as R&D have weighed on EPS and FCF. Oracles focus for several years now has been on organic development and creating tighter integration and innovation within its IaaS, PaaS, SaaS stack. The company has not made major acquisitions for several years. The net result of this strategy has been a steady deceleration in revenue growth. Half of Oracles business is stable (maintenance), about a quarter is declining and a quarter is growing. Analysts have an average target of $82 and short interest is low at 2.2% of the float. BAML out with a note on 9/9 noting that partners suggest steady deal activity in the Apps/Cloud business and has a $95 target on shares. Jefferies raised its target to $95 last week from $80. KeyBanc raised its target to $100 in July on a positive CIO survey. On the chart ORCL shares are forming a tight bull flag below the $90.50 level with potential for an upside move to $100 though shares fairly overbought on the weekly view with MACD fading. The $85.50 a level to watch for support on weakness as VWAP from the June sell-off low while $80 is a significant support level. ORCL options are pricing in a 5.2% move on earnings with 30-day IV Skew at +0.7 compares to the +0.5 52-week average. ORCL has seen mixed flows though has 30,000 September $90 calls sitting in OI from some large buys in mid-July. ORCL also has more than 10,000 September $87.50 puts in OI from size buys in mid-July while 2000 December $85 puts sold to open on 8/16 in a notable trade.

Trade to Consider: Long the ORCL September $90 Straddle at $5