Buy Or Fear Oracle Stock At $220?

Core Viewpoint - Oracle's stock has experienced a decline of 5% recently, reflecting broader concerns about a potential bubble in AI-related stocks, despite a strong performance driven by rising demand for cloud services, with shares up over 60% in the past year [2] Financial Performance - Oracle's revenues have grown 8.4% from $53 billion to $57 billion in the last 12 months, compared to a 5.1% increase for the S&P 500 [7] - The company has seen an average revenue growth rate of 10.7% over the last three years, outperforming the S&P 500's 5.3% [7] - Quarterly revenues increased by 11.3% to $16 billion in the most recent quarter from $14 billion a year ago, while the S&P 500 saw a 6.1% improvement [7] Valuation Metrics - Oracle's price-to-sales (P/S) ratio stands at 11.1, significantly higher than the S&P 500's 3.3 [7] - The price-to-earnings (P/E) ratio for Oracle is 51.0, compared to the benchmark's 24.0, indicating a rich valuation [7] - The current valuation of Oracle at 11 times trailing revenue is above its three-year average of 6 times revenue, suggesting the stock is relatively expensive [11] Profitability - Oracle's operating income over the last four quarters was $18 billion, resulting in an operating margin of 31.5%, compared to 18.6% for the S&P 500 [14] - The operating cash flow (OCF) for Oracle was $21 billion, yielding an OCF margin of 36.3%, significantly higher than the S&P 500's 20.2% [14] - The net income for Oracle was $12 billion, indicating a net income margin of 21.7%, compared to 12.7% for the S&P 500 [14] Financial Stability - Oracle's balance sheet appears strong, with a debt figure of $104 billion and a market capitalization of $635 billion, resulting in a debt-to-equity ratio of 16.4%, lower than the S&P 500's 20.3% [14] - Cash and cash equivalents amount to $11 billion, which is part of the total assets of $168 billion, leading to a cash-to-assets ratio of 6.7%, slightly below the S&P 500's 7.2% [14] Downturn Resilience - Oracle's stock has shown more resilience than the S&P 500 during recent downturns, recovering fully from significant declines in past crises [10][15] - The stock fell 41.1% from a high of $103.65 in December 2021 to $61.07 in September 2022, while the S&P 500 experienced a peak-to-trough decline of 25.4% [15] - Oracle's stock fully recovered to its pre-crisis peak by May 2023 and has since increased to a high of $256.43 in August 2025 [15]