Is It Too Late to Consider Oracle After Its AI Cloud Partnerships and Share Price Surge?

• If you are wondering whether Oracle at around $200 a share still offers value, or if the easy money has already been made, you are not alone. That is exactly what we are going to unpack here.
• Despite a choppy near term, with the stock down 1.9% over the last week and 22.0% over the last month, Oracle is still up 21.1% year to date, 7.9% over the last year, and 261.0% over five years. This indicates that long term sentiment has been strongly bullish.
• Recent headlines have focused on Oracle's aggressive push into cloud infrastructure and AI related workloads, as well as major partnerships that aim to deepen its role in enterprise data and applications. At the same time, the broader market debate about how much to pay for established software and cloud players has put a spotlight on whether Oracle's growth story can justify its current valuation.
• On our framework, Oracle scores a 4/6 valuation score, meaning it screens as undervalued on most, but not all, of the key checks we run. In the rest of this article, we will break down what different valuation approaches indicate about Oracle, and then finish with a way to think about valuation that brings those methods together with the broader narrative around the business.

Oracle delivered 7.9% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: Oracle Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today in $ terms. For Oracle, the 2 Stage Free Cash Flow to Equity model starts from last twelve months free cash flow of roughly $5.8 Billion and then applies analyst forecasts for the next few years, with later years extrapolated by Simply Wall St once formal estimates run out.

Those projections turn notably higher over time, with free cash flow expected to reach about $22.2 Billion by 2030 and continue growing from there. When all those future cash flows are discounted back to present value, the model arrives at an estimated intrinsic value of around $252 per share, implying the stock trades at roughly a 20.3% discount to its calculated fair value at current prices near $200.

This indicates that the market may not be fully pricing in Oracle's long term cash generation, even after its strong share price performance.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Oracle is undervalued by 20.3%. Track this in your watchlist or portfolio, or discover 925 more undervalued stocks based on cash flows.

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

For profitable, mature companies like Oracle, the price to earnings ratio is a useful yardstick because it directly links what investors pay today to the profits the business is already generating. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher uncertainty should translate into a lower, more conservative multiple.

Oracle currently trades on a PE of about 46.1x, which is well above the broader Software industry average of roughly 32.0x but still below the 71.2x average of its closest peers. Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE Oracle should trade on, given its earnings growth outlook, profitability, industry, market cap and specific risks. On that basis, Oracle’s Fair Ratio comes out at around 56.8x, which implies investors are actually paying less than what these fundamentals might justify.

Because the current 46.1x PE sits meaningfully below the 56.8x Fair Ratio, this multiple based view aligns with the DCF work and indicates the shares still screen as undervalued rather than stretched.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Oracle Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of a company’s story with a set of numbers, from revenue growth and margins through to a Fair Value estimate that you can easily compare to today’s price to decide whether to buy, hold or sell. On Simply Wall St, Narratives live in the Community page and are used by millions of investors as an accessible tool that ties together three steps: the business story, the financial forecast, and the resulting Fair Value. All of these update dynamically as new news or earnings are released so your thesis never goes stale. For Oracle, one investor might plug in a hypergrowth AI infrastructure story and arrive at a Fair Value around $390 per share, while another, more conservative on cloud and AI adoption, might land closer to $212. Narratives makes those different perspectives, and the gap between Fair Value and Price, transparent and comparable at a glance.

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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