eyeQ: an AI stock ticking lots of boxes
interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to analyse macro conditions and generate actionable trading signals. This is what it says about a well-known tech share.
25th April 2024 12:08
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Oracle
Trading signal: long-term strategic model
Model value:$124.22
Fair Value Gap: -7.7% discount to model value
Model relevance: 68%
Data correct as at 25 April 2024. Please click glossary for explanation of terms.
Behold the Oracle
Every investor knows the NVIDIA Corp (NASDAQ:NVDA) story. The chip-maker is the poster child of the artificial intelligence (AI) revolution.
But the more sophisticated investors are now thinking about a second wave of AI beneficiaries. And one theme is which stocks will benefit from a huge wave of spending on data software as more and more companies develop AI-powered chatbots to assist their clients. In this scenario, software giants are the kind of stocks you need to be paying attention to.
On eyeQ, Oracle Corp (NYSE:ORCL) now screens as 7.7% cheap to macro conditions. That matches the cheapest Fair Value Gap – difference between the share price and where our smart machine says it should trade – we’ve seen in 2024.
That valuation gap has arisen because macro conditions continue to slowly improve. eyeQ model value is grinding slowly higher and currently sits at $124.22. The stock, however, has sold off recently.
It is also interesting to note that Oracle is positively sensitive to inflation expectations, i.e. the stock is one that benefits when US inflation remains sticky. That could be a nice characteristic if you fear inflation is not going to return to target and this story is going to remain an issue for markets.
So, in short, macro matters and remains a tailwind for the stock. The recent sell-off is not justified by big picture stuff like economic growth and inflation. And there’s an AI theme potentially at play.
Seems like it ticks quite a few boxes.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long-Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
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