Should you buy Oracle as the company targets to acquire Cerner Corporation?

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By:

Motiur Rahman

on
Apr 22, 2022

Oracle Corporation (NYSE:ORCL) is trading at a valuation of $78.37. The lowest price over the last eight weeks was $70.23, while the highest was $84.51. This analysis seeks to determine whether Oracle is a good investment at the current valuation.

A lot of notable things are happening at Oracle. The company continues to record sustainable demand for its cloud infrastructure services and database solutions. Oracle is likely to report topline growth. However, recessionary fears create uncertainties for the company.


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Oracle floated an offer to acquire Cerner Corporation. The latter is a health information and EHR software company hence a strategic acquisition, if successful. Apart from the acquisition, Oracle continues with its share buyback program. The program signals the management’s feeling that the stock could be undervalued. The market may have a different opinion. 

At the current market price, Oracle has a PEG ratio of 2.09. The forward PE is at 16.68. The two ratios point to a stock that is potentially overvalued. Further, the company scores low on the investment style scores of value, growth, and momentum. This means that it should focus on new sources of growth.

Source – TradingView

Analysis of the price chart shows that Oracle’s price will stabilize at levels between $73 and $82. Traders can cautiously trade the stock between these levels. Potential support for the stock is at $70. If the stock sinks below this level, then investors would exit to cut losses.

Summary

Oracle extended the offer to acquire Cerner Corporation. Success in the acquisition would provide new growth avenues for the company. In the meantime, the stock will continue trading above the support level of $70.

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