Key Stats for Oracle Stock
- Price change for Oracle stock in last 6 months: -27%
- $ORCL Stock Price as of Oct. 19: $130
- 52-Week High: $287
- $ORCL Stock Price Target: $237
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What Happened?
Oracle (ORCL) is facing fresh worries in the bond market. Much of the AI trade cooled last week, led by CoreWeave, whose stock and debt have both been falling. Oracle is still investment grade, but its loans are starting to trade like high-yield debt.
The clearest sign is in credit default swaps, which work like insurance against default. Oracle’s five-year spread hit 300 basis points on Thursday before settling at 295.
S&P Global Market Intelligence says that level lines up with BB and B credit, which is junk territory. S&P cut Oracle to BBB- in July.
It said the fast-growing infrastructure business is adding credit risk. Another downgrade could come if leverage stays above 4x, or if Oracle doesn’t look on track for positive free operating cash flow by fiscal 2029.
The cash numbers explain the concern. Oracle has issued $118 billion in long-term debt and has another $39 billion in capital and lease obligations.
Analysts expect free cash flow of -$23.7 billion this year and -$36 billion in 2027. Part of this spending supports a $300 billion deal with OpenAI.
Oracle’s latest quarter was strong.
- Revenue hit $19.3 billion, up 30%.
- Cloud infrastructure revenue rose 121% to $7.4 billion.
- Non-GAAP EPS climbed 30% to $1.92.
- Oracle also raised its full-year outlook to at least $90 billion in revenue and $8.10 in EPS.
Cash is still going out the door, though. Capital spending was $28 billion in the quarter, which left free cash flow at negative $5 billion.
Oracle expects $90 billion to $95 billion in capex for the full year.
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What the Market Is Telling Us About Oracle Stock
The bond market is asking how long Oracle can fund this buildout, and a move to junk would matter beyond Oracle.
Deutsche Bank’s Jim Reid says it could force investors who can only hold investment-grade debt to sell. Oracle is also seen as a bellwether for AI, so the effects could spread.
A junk rating would also raise Oracle’s borrowing costs. Jamie Meyers of Laffer Tengler, which owns Oracle stock, says high-yield buyers won’t take 30-year debt.
He still isn’t worried and says Oracle just needs time to finish its buildout.
Vanguard’s Brad Collins agrees. He says balance sheets are healthy and he wouldn’t apply the stress in high yield to investment-grade names.
Oracle says keeping its investment-grade rating is its first priority and also expects strong free cash flow once projects ramp up.
Management said about half of its backlog should turn into revenue over the next 36 months.
So Oracle stock sits between strong growth and heavy debt. Investors will watch the credit spreads, any rating action, and the October Investor Day for clues.
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So what is Oracle stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
