Trying to decide what to do about Oracle stock right now? You are not alone. With shares sitting at $277.18, longtime holders have watched an impressive run, and there is no denying the company has defied many skeptics this year. Most recently, Oracle has captured headlines after strengthening its strategic partnerships in the cloud space, which many view as a major catalyst for growth down the line. Of course, this enthusiasm has not protected the stock from volatility. After a record-setting streak, the last month saw the share price dip by 10.2%, trimming the year-to-date gains to 66.9%. Even with that pullback, Oracle’s 5-year return stands at a remarkable 420.6%.
Recent coverage has highlighted Oracle’s aggressive investments in artificial intelligence infrastructure and cloud computing. While these moves have been broadly celebrated by analysts for improving the company’s long-term growth story, they may be subtly shifting how the market values that future upside compared to its historical performance. In the short run, this has led to a recalibration, suggesting investors are weighing the risks and rewards of Oracle’s transformation with fresh eyes.
For readers wondering whether the stock is undervalued at these levels, it is worth noting the company’s current value score is 1 out of 6, which is hardly screaming bargain by conventional measures. That said, looking at the numbers is just one part of getting the full story. Up next, I will dig deeper into the usual valuation approaches so you can see where Oracle stands today and hint at a more nuanced way to judge what Oracle is really worth in the long haul.
Oracle scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Oracle Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's dollars. This approach is favored for analyzing businesses with predictable cash generation, as it aims to determine the present worth of all expected future profits.
For Oracle, the latest reported Free Cash Flow stands at $5.8 Billion. Analysts have projected the company's Free Cash Flow for the next five years. For longer-term estimates up to 2035, data is extrapolated by Simply Wall St. According to these projections, Oracle's Free Cash Flow could rise to about $22.1 Billion by 2030. The model uses two stages: initial analyst consensus (where expectations vary and may even show negative cash flows in some intervening years), followed by extended projections as Oracle's investments in cloud and AI begin to mature.
Based on this method, Oracle's intrinsic value is calculated as $227.87 per share. With the current price at $277.18, this implies the stock is trading about 21.6% above what the DCF suggests is fair value. In simple terms, the market is pricing in more optimism than the DCF model currently supports.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Oracle may be overvalued by 21.6%. Find undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Oracle Price vs Earnings
The Price-to-Earnings (PE) ratio is one of the most widely used valuation tools for profitable companies like Oracle. Since PE reflects how much investors are willing to pay for each dollar of earnings, it works best for analyzing mature businesses with a track record of consistent profitability.
Determining what counts as a “normal” or “fair” PE ratio depends on several factors. Companies with higher expected earnings growth or lower risk typically command higher PE ratios, as investors anticipate larger future profits. Conversely, riskier or slower-growing firms tend to trade at lower multiples.
Right now, Oracle is trading at a PE of 63.51x, compared to the Software industry average of 35.33x and a peer average of 78.08x. According to Simply Wall St’s proprietary “Fair Ratio” metric, which factors in earnings growth, profit margins, industry dynamics, company size, and specific risks, a PE of 62.58x is considered fair for Oracle. This tool goes beyond simple peer or industry comparisons by adjusting for the company’s unique characteristics, resulting in a more nuanced estimate of what investors should be willing to pay.
With Oracle’s PE sitting just a little above its Fair Ratio, the shares appear to be valued ABOUT RIGHT based on expected growth, risk, and profitability at current prices.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Oracle Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your story behind the numbers—a way to capture your perspective on Oracle’s future by linking the company’s unique business drivers, growth opportunities, and potential risks directly to a set of financial forecasts and a Fair Value estimate. On Simply Wall St’s Community page, you can easily create or follow Narratives, making this powerful method of investing accessible to everyone, not just finance professionals.
With Narratives, you connect Oracle’s evolving story, such as its transition into an AI-first cloud leader or its riskier expansion into new markets, to specific assumptions about future revenue, margins, and profits. As soon as new financial results or news break, Narratives update automatically to help you quickly sense-check whether the current share price is above or below your Fair Value, supporting smarter buy or sell decisions. For example, some investors see Oracle justified at $344 per share thanks to strong AI and cloud growth, while others have a more cautious view, valuing it closer to $183 given competitive and margin risks. Whichever side you take, Narratives help you make investment calls with clarity and confidence.
For Oracle, however, we'll make it really easy for you with previews of two leading Oracle Narratives:
Fair Value: $344.07
Current Price vs Fair Value: 19.5% undervalued
Projected Revenue Growth Rate: 32.6%
- Strong demand for AI and enterprise migration is accelerating cloud revenue growth. Oracle's unique AI-integrated offerings are driving higher enterprise adoption and long-term contracts.
- Cloud infrastructure deployment and customer migrations are improving stability and operating margins. Outcomes are heavily reliant on ongoing AI demand and successful capacity scaling.
- Consensus expects robust revenue and earnings gains if Oracle secures its position in enterprise AI, but analysts disagree widely on the scale and margin sustainability of this growth.
Fair Value: $212.00
Current Price vs Fair Value: 30.7% overvalued
Projected Revenue Growth Rate: 14.4%
- Oracle is rapidly growing its cloud infrastructure, enterprise applications, and AI integrations, but faces intense competition from AWS, Azure, and Google Cloud.
- Future success depends on scaling Oracle Cloud Infrastructure and AI leadership amid execution challenges, high debt levels, and potential economic slowdowns.
- While Oracle is positioned for long-term growth in hybrid cloud and regulated industry solutions, profitability and financial discipline remain key concerns as it transforms its business model.
Do you think there's more to the story for Oracle? Create your own Narrative to let the Community know!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Valuation is complex, but we're here to simplify it.
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