Oracle Corporation

ORCL Details

Integration of Paytronix with Oracle: Oracle Corporation (NASDAQ: ORCL) delivers software, cloud, hardware, and software solutions to its clients. The company declared a quarterly cash dividend of 0.24 cents per share, payable on 22 October 2020. On 6 October 2020, the company had announced the integration of Oracle’s MICROS Simphony POS system to improve processing and digital order management of Paytonix order & delivery system.

New Cloud services: On 28 October 2020, Oracle informed the market about its new cloud services to combat the money laundering and outsmart financial crime.

Highlights of Q1FY21 Financial Results: On 10 September 2020, Oracle announced its first-quarter financial results, wherein the company posted revenues of ~$9.4 billion, in constant currency, up by 2% on a y-o-y basis. The marginal increase was due to a 2% y-o-y increase in cloud services and license support business, which came in at $6.9 billion. Furthermore, the Cloud license and on-premises revenues reported a growth of 8% on a y-o-y basis and came in at $886 million. Earnings per share, on a GAAP basis, increased by 16% to $0.72, while net income on a GAAP basis came at $2.3 billion, reporting an improvement of 5% over Q1FY20. On a trailing twelve months (TTM) basis, operating cash flow and short-term deferred revenues stood at $13.1 billion and $9.9 billion, respectively.

Quarterly Financial Highlights (Source: Company Reports)

Outlook:  ORCL’s has outperformed its guidance by generating more than $150 million of expected revenues.  Furthermore, the Group is confident that the company would report robust profitability aided by a massive surge in usage of Zoom application in the next quarter.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company exited the quarter with a cash balance of $27.3 billion. The stock of ORCL gave a return of 9.11% in the past six months but went down 5.27% in the past one month. The stock is trading close to its 52-week high level of $62.6. The company has a market capitalization of ~$171.98 billion, with a P/E multiple of 17.91x and an annualised dividend of $0.96. On a technical analysis front, the stock has a support level of ~$56.02 and an immediate resistance level of ~$60.53. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers like Salesforce.Com Inc (NYSE: CRM), SAP SE (NYSE: SAPG), and International Business Machines Corp (NYSE: IBM). Considering the factors mentioned above, robust Q1 FY21 results, healthy balance sheet and valuation, we give a “Hold” recommendation on the stock at the current market price of $57.12, down by 0.05% on 17 November 2020.

 

ORCL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

 

Marathon Oil Corporation

MRO Details

 

Reinstituting of Base Dividend and Debt Reduction: Marathon Oil Corporation (NYSE: MRO) is primarily involved in the exploration, extraction and production of natural gas and crude oil. The company has business operations in the US and Africa. On 1 October 2020, the company has announced reinstating of quarterly based dividend at 3 cents per share. Also, the company has tendered principal payment in cash of $500 million to decrease its debt of $1 billion raised through 2.8% senior notes due in November 2022. The principal cash payment will result in a reduction of $100 million of gross debt relating to the company’s second-quarter ending debt balance.

3QFY20 Financial Highlights: The company reported a net loss of 40 cents per share or $317 million for 3QFY20, as compared to net income per share of 21 cents per share or $165 million reported in the year-ago period, owing to softness in low oil and gas prices due to Covid-19 led uncertainties. Also, the company reported total revenues and other incomes of $754 million, down from $1,345 million from the previous year. During the quarter, capital expenditure of the company stood at $176 million due to the successful and efficient resumption of drilling and completion activity. As at 30 June 2020, the company’s liquidity stood at $4.1 billion, with cash and cash equivalents of $1.1 billion, and $3 billion of undrawn credit facility.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company will be prioritizing prudent capital management to withstand the falling commodity prices and raised its U.S oil-equivalent production guidance by 5,000 net boed at the midpoint. Also, the company is expecting its 2021 oil production to be in-line with 4QFY20, for total capital spending of ~$1 billion.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last six months, the stock of MRO was corrected by 5.49% and is currently trading close to its 52-week low level of $3.02. The company has a market capitalization of ~$4.34 billion, with an annualised dividend of $0.12. On a technical front, the stock of MRO has a support level of ~$3.97, and an immediate resistance level of ~$8.42. The company is focusing on several cost savings strategies. With the improvement in customer demand in the second half of the year, the company would return into the growth phase, which is a key positive. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers like Continental Resources Inc (NYSE: CLR), Apache Corp (NYSE: APA), and Cimarex Energy Co (NYSE: XEC). Therefore, considering the aforesaid facts, current trading levels, debt reduction initiatives, decent outlook and valuation, we give a "Buy” rating on the stock at the closing price of $5.50 per share, up by 0.36% on 17 November 2020.

MRO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

 

Intel Corporation

INTC Details

Intel NAND Memory Business to be Bought by SK Hynix:  Intel Corporation (NYSE: INTC) is a company engaged in designing and manufacturing products and technologies. On 19 October 2020, the company has announced an agreement with SK Hynix, that they would acquire Intel’s NAND Memory and storage business for US$9 Billion. On 22 September 2020, the company informed the market it has appointed Mr. Saf Yeboah-Amankwah as Senior Vice President and Chief Strategy Officer of the company, effective from 1^st November 2020. On 18 September 2020, the company had declared its quarterly dividend of $0.33 per share, payable on 1 December 2020. 

3Q FY20 Financial Highlights:  In 3Q FY20, the company reported revenue of $18.3 billion, down 4% from the previous corresponding period, due to COVID-19 led headwinds. Further, the company reported EPS, on GAAP basis, of $1.02, down by 25% on YoY basis. Operating Income stood to $5.1 billion, as compared to $6.4 billion in Q3 FY19. In the same period, the net income came in at $4.3 billion, down from $6 billion reported in the previous corresponding year. At the end of the period, the company’s cash balance stood at $8.2 billion.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company has provided guidance for the fourth quarter of FY20, wherein it expects total revenue to be around $17.4 billion and operating margin to be approximately 24.5% and EPS (earnings per share) to be around $1.02.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: In the coming quarter, the company expects momentum in consumer notebook PCs, owing to remote working and online trends. The stock of INTC went down 24.48% in the past six months and 6.41% in the last three months. The stock is trading close to its 52-weeks low level of 43.61. On a technical front, the stock of INTC has a support level of ~$43.91 and an immediate resistance level of ~$48.85. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). Considering the current trading levels, positive outlook, and valuation, we recommend a ‘Buy’ rating on the stock at the closing price of $45.53, down by 1.43% on 17 November 2020.

INTC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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