TickerTalk Headlines for September 25^th

FedEx Stock Dips: Why Analysts See a Quick Rebound Coming

Despite rallying for the entire week leading up to last Thursday’s earnings report, shares of FedEx Corporation (NYSE: FDX) delivered a major disappointment. The 15% they’ve shed from their pre-earnings high should tell its own story, as it was one of the worst days in the stock’s recent history.

FedEx missed analyst expectations for both headline numbers, which is never good. Earnings came in 24% lighter than the consensus, and revenue not only landed light but also was down year-over-year. In addition, the company’s forward guidance was light, with management lowering its expected revenue growth rate to a “low single-digit percentage rate,” having previously guided for it to be a low-to-mid single-digit percentage increase.

Despite Weak Outlook, FedEx Stock Shows Resilience in the Market

This only compounded matters, as it’s one thing to deliver a bad earnings report for the quarter just gone. Still, offering weaker-than-expected forward guidance for future quarters is considered nearly worse. Understandably, then, in that context, FedEx shares gapped down last Friday, but an interesting thing happened yesterday: They fell no further. FedEx shares closed up on the day, suggesting the market has already digested last week’s report and decided it might not be as bad as first thought.

Usually, when a company delivers that kind of update, it leads to multiple red days, especially if, as in the case of FedEx, it had been enjoying nearly two years of a rally up to that point. Even the eight green days leading up to last week’s report suggested that investors were expecting a blowout report, hence the expectation that there’d be a run of red days in response to the massive disappointment.

Bullish Analysts Back FedEx Shares Despite Recent Dip

However, the fact that the buyers outweighed the sellers during Monday’s session after having the weekend to think it over is powerful. Supporting the theory that this could be a serious entry opportunity is the fact that several of the heavyweight analysts have already been vocal in their support of FedEx shares. A handful, like Robert W. Baird and TD Cowen, reiterated their Outperform and Buy ratings while reducing their price targets. But some, like Bernstein Bank, reiterated their Overweight rating and went so far as to boost their price target on FedEx shares.

Considering FedEx shares closed below $260 on Monday evening, some of the analysts’ targeted upside here is seriously tempting. Take Bernstein Bank’s boosted price target of $337 or JPMorgan Chase & Co.’s $350. These are pointing to potential gains of around 35% in the coming weeks, which would not only make for a stunning comeback in FedEx shares but also have the company back trading at an all-time high.

FedEx’s RSI Suggests Quick Rebound With Upside Potential

Even though FedEx missed badly while offering weaker-than-expected forward guidance, much of the downsize was priced into the stock by the time the bell rang to end Friday’s session. As JPMorgan analyst Brian Ossenbeck wrote in a note to clients, last week’s “significant miss” was a reminder that parts of the business are particularly sensitive to any drop in demand. However, he and his team still expect FedEx to eventually spin off its underperforming freight operation, which means there’s a ton of upside that last week’s dip has only increased.

It doesn’t get much better for investors with a risk appetite and who love a bargain. From a technical perspective, FedEx’s shares are extremely oversold, as shown by the stock’s relative strength index (RSI). The RSI is a popular technical indicator that looks at a stock’s recent trading history and spits out a number between 0-100. Anything at or above 70 suggests the stock is considered extremely overbought, while the opposite is true when it’s at or below 30.

FedEx’s RSI dipped below 30 last week and was still there yesterday. If its shares can continue to consolidate above $255 this week, the comeback rally the analysts are calling for could happen very quickly.

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PayPal Soars to New Heights: Why Analysts See More Upside

There aren’t many deals to consider for further value in the technology sector. However, one stock is looking to change that narrative by delivering on previous promises. Shares of PayPal Holdings Inc. (NASDAQ: PYPL) have recently made a new 52-week high, now trading near $80 a share for the first time since the first quarter of 2023. The issue becomes whether they can sustain this new price or even reach a higher valuation.

According to a few Wall Street analysts, PayPal may be able to do this in the coming quarters. The financial sector is one of the first to move when the economic landscape shifts, such as today, with the interest rate pivot coming from the Federal Reserve (the Fed) to help boost transaction volume and fees for stocks like PayPal. But then, there’s the subject of competition.

It’s true that PayPal doesn’t operate in a vacuum. It competes with behemoths in the space like Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA). Even in the smaller market bracket, PayPal must remain competitive and attractive relative to competitors like Block Inc. (NYSE: SQ). Investors could safely assume this may be the case moving forward with PayPal stock for reasons that will become clear in just a bit.

Price Action and Forecasts Position PayPal Stock Ahead

Investors can begin to get a feel for what the market feels about PayPal stock through price action. Compared to its closest competitor, Block, PayPal is trading at a new 52-week high now, while Block is trading down to roughly 77% of its 52-week high.

There must be a reason traders and markets are bidding higher for PayPal, which can be found in expectations and forecasts. Earnings per share (EPS) growth forecasts reflect PayPal’s jump from $1.19 in profits today to $1.30 for the same quarter next year.

This 10% jump is significantly higher than Block’s EPS forecasts for $0.50, down from today’s $0.93, a nearly 50% contraction in comparison. Given that PayPal is a $74 billion company, investors cannot—and should not—compare its growth to that of Visa or Mastercard, which are closer to the half-trillion mark.

However, investors can compare upside potential. Those at Mizuho Financial decided to place a $90 price target on PayPal a couple of months ago, jumping the gun early given that nobody else followed the trend until now. Analysts from Deutsche Bank topped Mizuho’s view with a $94 a share price target.

This implies that despite the current yearly high, PayPal has about 21.2% upside left to run higher. PayPal takes the lead compared to Block’s recent $70 price targetfrom New Street Research. When it comes to Visa and Mastercard, a respective 7.5% and 3% upside potential pales next to PayPal’s growth.

The question is whether PayPal’s financials and business have what it takes to deliver on these promises.

PayPal Proves Stronger Than Investors Previously Expected

Looking at PayPal’s latest quarterly earnings results, the trend toward a potential higher price becomes clearer. Starting with revenues, PayPal reported a net increase of 8%, along with a similar 8% expansion in transaction margins to boost further profitability down the line.

Regarding other drivers or key performance indicators (KPIs), PayPal didn’t disappoint either. Total payment volume rose 11% in the year to $416.8 billion, and transactions per active account also rose 11% in signal activity within the platform despite worries about the consumer and business economy.

Here’s why markets and bears have kept PayPal stock so low during the past few quarters. Net active accounts decreased by 0.4% to 429 million, which may have been enough to scare capital away from this company. Still, those savvy enough will focus on the other profit metrics on the rise.

All told, PayPal reported up to $1.4 billion in free cash flow (operating cash flow minus capital expenditures). Knowing that the best is just ahead for PayPal, management has committed up to 100% of the company’s free cash flow into a share buyback program.

This addition to the buyback program would put PayPal on pace to buy back up to $5 billion worth of stock, which is nearly 10% of the company’s market capitalization. When management approves such aggressive buybacks, it typically means they think the stock is cheap enough today and also expect to see higher prices ahead.

However, management isn’t the only one buying up PayPal stock; those at Legal & General Group decided to boost their holdings by as much as 3.3% as of August 2024, bringing their net position to $501.2 million today. This is only a fraction of the $4 billion of institutional capital called PayPal stock home over the past 12 months, a figure investors can safely assume will increase.

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Oracle Stock: Cloud and AI Tailwinds Makes This a Must-Own Stock

Oracle Co. (NYSE: ORCL) started as a pioneer in relational databases for businesses in 1977. The company has transformed itself into a major provider of cloud-based software as a service (SaaS) and infrastructure as a service (IaaS) platform to enterprises across 175 countries. Oracle’s platform services highlight why leasing is more cost-effective than building your own. Oracle has migrated from on-premises database software sales to becoming a major enterprise cloud provider through its Oracle Cloud Infrastructure (OCI).

Oracle: A One-Stop Shop Platform For Enterprises

The computer and technology sector giant provides supply chain management (SCM), customer relationship management (CRM), human capital management (HCM) and enterprise resource planning (ERP) software coupled with industry-leading database management services, all integrated into its cloud platform. It enables clients to streamline their complete IT operations and access a single source of truth across all critical business functions.

Oracle’s Data Intelligence Platform (ODIP) powered by OCI enables companies to use data from different sources for a unified experience that combines data warehouses, analytics, artificial intelligence (AI) and orchestration. Oracle’s Data Lake and generative AI-powered analytics were introduced for its ODI platform.

Oracle competes with individual companies that specialize in one or more of Oracle’s offerings, including Salesforce Inc. (NYSE: CRM), Workday Inc. (NASDAQ: WDAY) and hyperscalers Amazon.com Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOGL) Google and Microsoft Co. (NASDAQ: MSFT).

Keep Your Clients Close, Keep Your Competitors as Clients

Oracle vigorously competes with major hyperscalers Google Cloud, Amazon.comAWS and Microsoft Azure in the cloud infrastructure and enterprise application markets. Ironically, they are also major customers of Oracle as well. Oracle’s database technology is the industry standard. Oracle has partnered with the hyperscalers as its become more evident that customers want the flexibility and choice to use multiple clouds.

• Amazon has a strategic partnership with Oracle, launching its Oracle Database@AWS offering that enables customers to access Oracle Autonomous Database on dedicated infrastructure and Oracle Exadata Database Service within AWS. It provides customers with a unified experience between OCI and AWS.
• Google is partnered with Oracle to integrate Oracle Database with Google Cloud. It enables customers access to Oracle Database services, providing a connection between both Oracle Cloud and Google Cloud services. Incidentally, Google won its U.S. Supreme Court case where Oracle sued over Google’s use of Java software to code the Android operating system in 2005. Four Oracle Cloud regions are live at Google with 14 more being built.
• Microsoft uses Oracle Database services and OCI to power its Bing conversational searches. Microsoft’s Azure is also partnered with Oracle to allow their customers to operate Oracle Database services on OCI inside its Azure data centers. Microsoft has grown to be one of Oracle’s largest customers. Seven Oracle Cloud regions are live at Microsoft with 24 more being built.

Oracle Had a Smashing Start to Fiscal Q1 2025

Oracle reported fiscal Q1 2025 EPS of $1.39, beating analyst estimates by 6 cents, as revenues rose 7% YoY to $13.31 billion, beating $13.29 billion consensus estimates. Total remaining performance obligations (RPOs) rose 53% YoY to a record $99 billion.

Cloud revenue, including IaaS and SaaS, surged 21% YoY to 5.6 billion. Cloud Infrastructure (IaaS) revenue climbed 45% to 2.2 billion. Cloud Application SaaS revenue rose 10% to $3.5 billion. Fusion Cloud ERP SaaS revenue rose 16% to 900 million.

NetSuite Cloud ERP SaaS revenue rose 20% to $900 million. Oracle signed 42 additional cloud GPU contracts were signed for $3 billion. Its database business is growing due to the multi-cloud agreements with Amazon, Microsoft, and Google. Oracle database technology will soon be accessible to customers within every hyperscaler’s cloud.

Oracle also guided fiscal 2026 revenue to be at least $66 billion. It expected fiscal 2029 revenue to surge through $104 billion as it expanded its cloud IaaS business, capitalizing on an ever-increasing number of AI use cases.

Oracle’s 162 Cloud Data Centers Worldwide

Oracle has 162 cloud data centers that are live or under construction worldwide. The largest data center is 800 megawatts (8 million watts) and contains acres of NVIDIA Co. (NASDAQ: NVDA) GPUs that will train the world’s largest models. To put this in perspective, 800 megawatts is enough to power 400,000 homes.

Oracle Founder and Chairman Larry Ellison commented, “With today’s AWS announcement, our customers will be able to use Oracle’s latest Exadata and Exascale RDMA clusters with the latest versions of our database software, from within the Microsoft Azure cloud, from within the Google Cloud and from within the AWS cloud. This will enable customers to use the Oracle database anywhere and everywhere. That has always worked well for our customers and our database business.”

Ellison concluded, “We believe our cloud partnerships with AWS, Microsoft, and Google will turbocharge the growth of our database business for years to come.”

ORCL Stock Attempts a Bull Flag

A bull flag follows a sharp price rise forming the flagpole, followed by parallel descending upper and lower trendlines forming the flag—the bull flag breakout forms when the stock surges through the upper trendline resistance.

ORCL peaked at all-time highs at $173.94 following earnings and raised guidance. The flag formed from the highs as ORCL formed lower highs and lower lows with parallel descending trendlines. The bull flag is attempting to form a breakout at $168.00. The daily relative strength index (RSI) is in overbought territory at the 74-band. Fibonacci (Fib) pullback support levels are at $158.79, $154.11, $145.32, and $138.36.

Oracle’s average consensus price target is $163.88, and its highest analyst price target is $210.00.

Actionable Options Strategies

ORCL stock has overbought conditions. Therefore, bullish investors can buy on pullbacks using cash-secured puts at the fib pullback support levels to buy the dip and write covered calls at fib extension levels to execute a wheel strategy for income.

Bullish options investors can limit maximum downside and profit from modest upside gains for less capital than owning the stock by implementing a bullish call debit spread.

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