Artificial intelligence stocks Oracle and ServiceNow — along with retail giant Target — headline Wednesday's IBD Screen Of The Day, a column that focuses on top ideas in the IBD Stock Screener. AI stocks Oracle and ServiceNow are approaching fresh buy points.
Wednesday's stocks to watch come from the Stocks Funds Are Buying screen. This screen identifies stocks in which big mutual funds are increasing their positions.
AI Stock Oracle Eyes Buy Point
Oracle is trying to break out past a 127.54 buy point, according to IBD MarketSurge chart analysis. Shares of Oracle stock slipped 0.8% Wednesday morning, about 2% below the entry. Wait for a decisive move above that level before considering a purchase.
On March 12, the AI stock soared nearly 12%. And it is holding most of those gains, sitting just 5% away from its 52-week high. Meanwhile, the relative strength line continues to hold tight, but doesn't yet show the market-beating strength desired by investors.
In its latest quarterly report, Oracle reported better-than-expected earnings and showed that AI is boosting the company's cloud business.
Oracle said it earned an adjusted $1.41 per share on sales of $13.28 billion for its February-ending quarter. On average, analysts projected the Austin, Texas-based company would post adjusted earnings of $1.38 per share on sales of $13.28 billion, according to FactSet. Adjusted earnings increased 16% year over year while sales increased 7% for the company's fiscal 2024 third quarter.
Target Stock Nears Breakout
Retail giant Target is rapidly approaching a 175.33 buy point in a giant cup with handle. Target stock rallied 1.2% midday Wednesday, less than 1% shy of the latest buy trigger.
On March 5, Target handily beat earnings estimates, sparking a 12% jump on March 6.
Target earnings increased 57.7% to $2.98 per share to mark seven consecutive quarters of gains. Revenue rose 1.7% to $31.9 billion, reversing two quarters of declines.
Target also announced a new paid membership program that will launch next month, competing with rivals Amazon.com and Walmart. The new subscription tier, called Target Circle 360, will include perks like unlimited free same-day delivery for orders over $35 in as little as one hour, free two-day shipping, and other benefits, CNBC reported.
Funds Pile Into AI Stock ServiceNow
Amid the growing investor interest in AI stocks, software leader ServiceNow is building a flat base that has an 815.32 buy point. Shares dropped more than 2% midday Wednesday, threatening to close below their 50-day line.
ServiceNow in mid-March hosted an event in Washington, D.C., to showcase its fast-growing federal government business.
"We walked away with the view that ServiceNow's record 2023 Fed (federal government) momentum will carry through 2024, with agencies continuing to invest in their overall IT modernization efforts," said Jefferies analyst Samad Samana in a report.
"GenAI was the main focus, with ServiceNow showing how GenAI can streamline processes for Fed customers," he added.
ServiceNow is expected to report second-quarter earnings in late April. Investors may want to be cautious ahead of the report. One strategy around earnings would be to use call options to participate in a potential rally while limiting risk.
ServiceNow was Tuesday's IBD Stock Of The Day.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
