Why Oracle Stock Is Expensive

Core Viewpoint - Oracle's stock has surged 10% recently, reaching $221.53, but this valuation appears stretched compared to its fundamentals, suggesting a potential price correction to around $156 may be prudent [2][3]. Valuation - The current stock price reflects aggressive expectations for future growth, creating a risk-reward imbalance where upside potential is limited and downside risk increases if growth underperforms [3][4]. Growth - Oracle has demonstrated strong operational performance, with a 10.2% average growth rate in revenue over the past three years, and a 9.7% increase in revenues from $54 billion to $59 billion in the last 12 months [9]. - Quarterly revenues rose by 12.2% to $15 billion from $13 billion year-over-year [9]. Profitability - Oracle's operating income for the last 12 months was $19 billion, reflecting an operating margin of 31.6% [10]. - The company generated approximately $12 billion in net income, indicating a net margin of roughly 21.1% [10]. Financial Stability - Oracle's current market capitalization stands at $626 billion, with $105 billion in debt, resulting in a debt-to-equity ratio of 16.9% [12]. - The cash-to-assets ratio is 6.1%, with cash and cash equivalents amounting to $11 billion of total assets of $180 billion [12]. Resilience - Oracle has shown more resilience than the S&P 500 during economic downturns, recovering fully from significant declines in past crises [11][13].