IBM and Oracle stocks had very different 2017 performances
Shares of Oracle Corporation (NYSE:ORCL) and IBM Corp. (NYSE:IBM) are trading higher this morning following bullish analyst updates. For ORCL stock, Morgan Stanley raised its rating to "overweight" from "equal weight," and lifted its price target to $57 from $50. IBM stock, meanwhile, was upgraded to "outperform" from "sector perform" at RBC, and its price target was moved up to $180 from $160.
Digging deeper, Oracle is trading 2.8% higher at $47.95. In its note, Morgan Stanley said it believes the stock has a low valuation and expectations for the company's cloud business have been depleted. The covering analyst expects earnings growth to lead to a rise in share price. To be exact, the firm's new price target of $57 prices in upside of 20%.
ORCL stock had a strong 2017, rising 23% and hitting a record high of $53.14 back on Sept. 14. However, the equity has since suffered two bear gaps and recently fell below its 200-day moving average.
But optimism remains high. Eighteen of 27 covering analysts say it's a "buy" or better, and call buying has more than doubled put buying during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).
Turning to IBM, the covering analysts at RBC cited the stock's attractive valuation and foreign exchange tailwinds as two reasons for the bull note, along with expected revenue growth in 2018. The shares have added 3.1% in response to trade at $158.99, but remain almost 5% lower on a year-over-year basis. Plus, the security has a number of layers of technical resistance sitting right overhead.
To be more specific, the round $160 level corresponds with a 50% Fibonacci retracement of the equity's 52-week high and its 52-week low. The shares also have to contend with their downtrending 50- and 200-week moving averages, which have capped previous breakout attempts.
Despite this, options traders at the ISE, CBOE, and PHLX have remained optimistic, based on IBM's 10-day call/put volume ratio of 2.78. Not only does this show call buying has almost tripled put buying in recent weeks, but it ranks in the 92nd annual percentile, showing an unusual interest in long calls recently.
