Buying $ORCL? Analysts are, but I’m not...
Oracle shares have lost 54% over the past year. Even so, 80% of analysts maintain a Buy rating, and their price target (median) is roughly 78% above the current price.
The business is booming, but
Revenue rose by almost a third in the last quarter, and profit grew even faster. The volume of contracted orders for AI computing capacity reached 638 billion dollars, several times annual revenue. But that backlog is the biggest question mark. After all, it isn’t (yet) real money in the company’s account.
Capacity has to be built first; only then can it generate revenue. Over the past 12 months, Oracle invested 75.66 billion dollars in infrastructure, while operations generated “just” 46.94 billion. Free cash flow is therefore roughly 28.7 billion dollars in the red, and the company is covering the shortfall with debt, which has significantly changed its balance sheet.
I also noticed that Larry Ellison is reportedly planning to sell 7.5 billion dollars’ worth of $ORCL shares. If he had sold them a year ago, he would have been a little better off.
After the recent drop, the valuation is nowhere near stratospheric, but there are still plenty of unknowns here. What do you think of Oracle?