Citi sees an opportunity in Oracle after ’one of the most extreme’ stock drawdowns

Investing.com -- Citi opened a positive catalyst watch on Oracle (NYSE: ORCL) on Wednesday, telling investors that the software group's recent collapse has created an entry point ahead of results and its investor day in late October.

The bank said it sees "opportunity after one of the most extreme dislocations and drawdowns in the stock's history," driven by investor capitulation and technical selling factors including credit spreads and at-the-market equity issuance.

Shares have underperformed nearly all large-cap technology peers by a wide margin over the past three months, with a peak-to-trough drawdown of more than 50% inside 30 to 40 days, a move Citi described as four to five standard deviations against historical volatility.

The bank believes expectations have now reset, with forced selling likely behind the stock and bond and credit default swap spreads recovering.

Furthermore, Citi pointed to strong second-quarter updates from neocloud providers as a positive read-across, saying insatiable demand is driving pricing and margin upside and that Oracle should see similar benefits on newly signed contracts.

It noted Oracle added more than $85 billion of sequential backlog in the May quarter, far above the roughly $9 billion from the neoclouds.

The bank raised its fiscal 2028 to 2030 revenue and earnings estimates, taking its fiscal 2030 EPS forecast to $22, above both Oracle's own $21 target and consensus near $20. Its price target remains $330.

You May Also Be Interested In

• Dell’s earning report was bullish for Intel CPU demand, analyst says
• Oracle (ORCL) call put ratio 4 calls to 1 put with a focus on September 165 calls into quarter results
• Oracle (ORCL) call put ratio 2.2 calls to 1 put into quarter results