Don’t Sweat Slowing Earnings Growth in Great Companies

Earnings season has been solid the past few quarters for most stocks. Companies have been reporting numbers that crush pandemic levels from over the past year.

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  • Now, however, companies are getting past the worst of the pandemic, and growth has been slowing from the artificial boost from reopening (or providing a useful service during the pandemic. That’s creating some modest selloffs, but also some modest buying opportunities.

    Case in point? Oracle (ORCL). The tech giant, best known for database technologies, has been expanding into enterprise software services. The company just reported an earnings beat, but overall the numbers weren’t the impressive beat that many companies have reported over the past year.

    Even with a post-earnings drop, shares are up nearly 50 percent over the past year, outperforming the S&P 500. And the stock has done so with a beta of 0.8, meaning shares have had a steadier return while outperforming.

    Action to take: Shares are still attractive here given the company’s growth in web services. Investors may like shares, which trade under 20 times forward earnings. Shares also yield 1.4 percent.

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  • Traders may want to bet on a resumption of the stock’s uptrend with a call option. The January $95 call, last going for about $3.50, has the potential for a further move higher.


    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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