Is Oracle’s Valuation Justified After Latest Cloud Partnerships and Wild 32.8% Price Swing?

• Thinking about whether Oracle is a deal or simply priced to perfection? You are not alone, as many investors are looking deeper into the numbers to understand its real value.
• Oracle’s stock price has seen a wild ride lately, rising 32.8% year-to-date, but dropping 24.3% over the last month and 6.6% during the past week. This shows just how quickly sentiment can swing.
• Some of this volatility follows Oracle's announcement of major new cloud partnerships and recent product launches, which have filled headlines and sparked fresh debates about the company’s growth trajectory and ability to stay competitive in a rapidly changing tech landscape.
• Oracle currently scores 2 out of 6 on our valuation checks. Before we jump to any conclusions, let’s dig into the valuation methods that matter most, with an even smarter perspective revealed at the end of the article.

Oracle scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Oracle Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth today based on projections of how much cash it will generate in the future. It then discounts those future cash flows back to the present value. This approach gives investors a data-driven benchmark for fair value.

Looking at Oracle, its current Free Cash Flow stands at $5.84 Billion. Analysts have provided detailed cash flow projections for the next five years, after which Simply Wall St extrapolates these forecasts further. By 2030, Oracle’s Free Cash Flow is projected to reach roughly $20.34 Billion, indicating substantial growth ahead.

Using the 2 Stage Free Cash Flow to Equity model, Oracle’s intrinsic value comes out to $212.74 per share. When compared to the current market price, this suggests the stock is about 3.6% overvalued based on today’s numbers.

Result: ABOUT RIGHT

Oracle is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Oracle.

Approach 2: Oracle Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is often the go-to metric for valuing profitable companies because it measures how much investors are willing to pay today for a dollar of current earnings. For established tech giants like Oracle, the PE ratio can offer a snapshot of market expectations about future profitability and growth.

However, figuring out what a "fair" PE ratio should be is not always straightforward. Factors like future earnings growth, risk profile, and how consistently a company can generate profits all impact what investors consider a reasonable multiple. Growth companies typically command higher PE ratios, while mature or riskier companies tend to trade at lower ones.

Currently, Oracle trades at a PE ratio of 50.5x. That is well above the broader Software industry average of 30.0x and still under the average PE of its selected peers at 71.4x. This high multiple reflects optimism around Oracle’s growth outlook and competitive position, but also indicates the stock is richly valued in absolute terms.

Simply Wall St’s proprietary “Fair Ratio” model, which considers Oracle’s earnings growth, profitability, market cap, industry, and specific risk factors, estimates a fair PE ratio of 61.9x. Unlike broad industry or peer comparisons, the Fair Ratio adjusts for Oracle’s unique situation and offers a more nuanced read on value.

Comparing Oracle’s current PE of 50.5x with the Fair Ratio of 61.9x, the valuation looks reasonable and actually leans slightly to the undervalued side for long-term investors, but remains well within a normal range.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1421 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 a clear, personal story about how you see a company’s future that links your assumptions about growth, margins, and fair value. This puts your perspective behind the numbers.

Narratives connect the dots from a company’s real-world story and business drivers to a specific financial forecast and a fair value calculation, making investing more approachable and personalized. On Simply Wall St's Community page, millions of investors use Narratives to track their outlooks, compare views, and see how their assumptions stack up against others for any stock, including Oracle.

With Narratives, you can easily visualize when to buy or sell by comparing your Fair Value estimate to the current market price. Because they update dynamically as new news and earnings reports arrive, you always have fresh, relevant data behind your conviction.

For example, while some investors’ Narratives for Oracle see a fair value of $183 and focus on risks around debt and heavy capital expenditure, others are more bullish with a fair value of $325 based on accelerating AI-driven cloud adoption and margin expansion. This shows how diverse perspectives can lead to different investment decisions, all backed by real numbers and updated forecasts.

For Oracle, we'll make it really easy for you with previews of two leading Oracle Narratives:

• 🐂 Oracle Bull Case

  Fair value: $344.04

  Undervalued by: 35.9%

  Revenue growth rate: 32.8%

  • Demand for AI workloads and Oracle's differentiated AI cloud offerings is expected to drive sustained double-digit revenue growth and margin expansion.
  • Oracle's strong backlog, rapid customer migration to Oracle Cloud, and expanding high-value enterprise contracts support improved revenue stability and operating margins.
  • Main risks are related to high CapEx, heavy reliance on AI and cloud demand, and competition from larger cloud providers. With a consensus price target just above the current share price, analysts consider the stock fairly valued if growth continues.
• 🐻 Oracle Bear Case

  Fair value: $212.00

  Overvalued by: 3.9%

  Revenue growth rate: 14.4%

  • Oracle's transition to cloud and AI will face intense competition from AWS, Azure, and Google Cloud, which may challenge margin expansion and growth ambitions.
  • Execution risks include scaling its cloud business and integrating AI, while also managing a leveraged balance sheet and investing in global data centers.
  • The business model remains resilient with recurring revenue, but debt and economic slowdowns could impact future performance despite long-term opportunity.

Do you think there's more to the story for Oracle? Head over to our Community to see what others are saying!

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.

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