ORCL Path to Mag 7 AI Strength, Cloud & Data Centers Critical Earnings Focus

0:00We're back on Morning Trade Live. Oracle is the earnings headliner this afternoon when it reports up at the closing bell. Analysts are expecting adjusting just an EPS of a 70 bucks a per share of a bucks 70 excuse me per share on revenue didn't mean to scare me there. Of nearly 17 billion dollars, shares are down more than 20% this year and more than 55% off last September's all time high. All right, let's go inside out on Oracle. Ahead of earnings joining us now with Stephen Dickens CEO and Principal Analysts Hyperframe Research. I hope I didn't scare you there with that adjusted EPS. Yeah, I would be setting a very high bar there. What are you going to be watching our for? Because it feels like an alphabet soup with this name sometimes, the RPO, the ROCI. What exactly are those metrics? What are they going to tell us? I think the key things that I'm going to be looking for from the print this afternoon is this obviously what the company's doing

1:00from an infrastructure build at point of view. I'll be looking for a more nuanced story from the company. Obviously that AI build out is what and the CapEx investment is. A key indicator for a lot of people, they just did a capital raise 50 billion. So I think they're going to be deploying that and we're going to get future view into that and obviously the backlog that you talked about. I think there's a lot of commentators that are misinterpreting that and looking at it as pure GPU build out, wanting that ICs that are called putting its infrastructure into other cloud providers. So that nuance is not coming through. But I think the key thing for me is going to be infrastructure build out for AI and then what they're saying with regard to backlog. Right. And obviously, Stephen, this is the first look we're going to get into this AI infrastructure amid some of the financing concerns around this company. I mean, obviously we've had some of the negative headlines

2:03associated with Oracle, particularly around the credit swaps, obviously around it, debt to equity ratio as well. How do you anticipate management is going to address that through the messaging? So I think it's going to be around OCI build out. This is Oracle's cloud infrastructure the build out. We talked about the acronym soup here. This is around their core cloud business. The way to think about this is what Amazon does with AWS, what Microsoft does with Azure, and what Google does with its Google Cloud platform. So really 68% last quarter, I'm expecting this to be up in that region, if not accelerating beyond that number. That's tracking more than those three names that I just mentioned. So that's going to be a key indicator for me. This is traction with their core cloud business. Their winning share, their growing massively. I've been trying to coin the phrase now that they're the fourth hyperscaler. I think we saw core we've recently get to five billion

3:06of revenue and be the fastest cloud provider to do that in their recent earnings. So I think the momentum is behind this sector as a whole. I think that's what I'm going to be looking for. And if they can position that growth as building into demand, rather than building into future demand, that's going to really resonate with the markets. With respect to that IPO that you mentioned and some of that market share and demand, I'm just wondering what you're looking to hear about or what we can anticipate management to say with respect to diversification here, because with respect to IPO, I believe it's about 60% tied to open AI. Are we looking for them to come out and announce anybody else as far as who they're working with and how they're gaining market shares from the core weaves, as you mentioned and the nebiusness of the world? I think this is obviously a company that's relatively new in cloud terms.

4:09They got into this market back at about the 2010 timeframe. That's about 10 years later than the AWS team did part of Amazon. So there's still a build out to go here. I've seen some really lazy reporting over the last couple of days around where Oracle's build out is. And Larry and the team are going to do a really good job this afternoon. They always do on messaging the facts. So I think we're looking for some of that. I think that diversity of customers, this is a really, really balanced company, Sam. This is a company that's got exposure to healthcare with the sooner business. They've got a huge deployment of their database platforms. I talked about what they're doing in the cloud with some of their natural competitors for the OCI business with the database. So I think they've got an enterprise apps business. So whilst all the focus is on CapEx and the OCI and that cloud business,

5:10this is a really robust business has been going since the late 70s and is deeply embedded in those enterprise clients. Whilst the headlines have been around AI, this is a balanced organisation that's got a strong balance sheet as far as I'm concerned. OK, always a great set up, Stephen. Thanks so much for the preview. We'll be watching this afternoon. Let's see what they say. Stephen Dickens, their CEO and principal analyst, a hyperframe research. Appreciate your time. Let's trade it now with Tom White, host of Fast Market. So we're talking about Oracle, which as the charges showed, Tom has come off quite a bit. Just talk us through an example trade for this one. Yeah, more than quite a bit here, Sam, on this pullback from those September highs, down over 55% from those levels. So the bars were actually pretty low in this one. implied volatility levels really elevated the IV percent tower rank just below the 90% level. So we're in the top, basically 10% of implied volatility levels that we've seen over the last 52 weeks. So I looked at a strategy where you don't have to be a hero

6:12and you can basically take a directional bias on Oracle going into earnings while giving yourself maybe a better probability of success. So I went out to the March 20th monthly options and expiring just 10 days here. And I'm going to look at selling a neutral to bullish short put vertical. It's a little less aggressive. It's a passive type of strategy while still taking that directionally bullish bias here. So in that March 20th monthly options, we're going to sell the out of the money 140 strike put nearly 10 bucks out of the money to the downside. And then against it because we want to stay risk to find going into earnings, we're going to buy the 130 strike put. So a short $10 wide neutral to bullish put vertical. You're going to collect roughly. I've got about a 260 credit on here. That's basically what you can make, the credit you collect. So 260 bucks with just about $740 in risk, but that's all the way below the 130 strike. Now I mentioned the higher probability of success that short 140 strike put that you're selling in the strategy about a 65% probability

7:16of finishing out of the money at expiration, which is what you want. The stock either goes higher, consolidates here or even goes lower, but remains above that break even a 137 40 to the downside. So you've got that big cushion of about 8% to get to that break even level on this passively neutral to bullish short put vertical here in Oracle. All right, looking for the OCI, looking for the IPO, looking for a little bit more nuances to what they say according to Stephen Dickens, but we are trading lower 1.3% heading into this report card. Always appreciate the example trade for us. Tom, thanks so much. All right.