Oracle share prices surged on Monday after a report over the weekend from the Wall Street Journal that the Redwood Shores-based company had won a bidding war for the Tik-Tok app. The WSJ said that the app’s Chinese owner ByteDance had accepted Oracle’s “offer” for the app’s U.S. business, which is more of a licensing deal.
The deal will not be structured as a sale, which means Oracle won’t have direct access to TikTok’s algorithms which control how new content is shared with users. The algorithm is seen as key to the user experience that drove popularity in the app. In the U.S. TikTok is said to have 60 million monthly users.
Oracle trades in the S&P500 and has a price/earnings ratio of 17x annual earnings and a price-to-sales ratio of 4.5x. In comparison, Apple’s share price values the company at 34x P/E and 7x sales. This is down to Apple’s growth, where the iPhone maker saw 10% quarterly growth in earnings, while Oracle’s earnings were lower by 6% .
Microsoft confirmed that they would not be gaining the TikTok deal, saying, “ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft. We are confident our proposal would have been good for TikTok’s users, while protecting national security interests”. The U.S. intervened in the story and forced the sale due to accusations of spying and in order to safeguard U.S. technology from foreign firms. The deal will now need approval from the CFIUS, which is a panel within the Department of Commerce that reviews deals involving foreign buyers that could have national security issues.
ORCL Technical Outlook
ORCL shares surged on Monday but the price has bounced from the resistance at $60.50 which marked the July 2019 high. This level will be key to the path of Oracle’s share price. Traders should only buy with a close above that level, or look for a dip to buy on support. For risk management advice, the Investing Cube Trading Course or one-to-one Coaching will help.
ORCL Share Price Weekly Chart