Key Takeaways
- Oracle shares rose 5% after pricing the $20 billion stock and bond sale its own cap allowed through fiscal 2030.
- About 86 million new shares and $10 billion of 7%-8.65% notes are a fair price for settling the funding question.
- The cap leaves little slack: consensus has free cash flow negative until fiscal 2029.
- Vertiv, AMD and Super Micro bounced too; AMD and Super Micro report tonight.
Oracle (ORCL) is up 5% today after pricing its $20 billion stock and bond sale late Monday, after the filing sank the stock 9% earlier that day.
AI-infrastructure suppliers bounced too, including Vertiv (VRT), Advanced Micro Devices (AMD) and Super Micro Computer (SMCI).
Right on script
Oracle sold 86.2 million shares at $116 and $10 billion of notes, the full $20 billion it capped new raises at through fiscal 2030 last week.
Monday’s drop puzzled Baird analyst Rob Oliver. “This seems to be exactly what they previewed,” he told CNBC. “So I’m not sure why the market is freaking about it.”
I’m with him.
The bill is manageable
The new shares add about 3% to the share count, and the notes about $780 million a year in interest. Analysts expect earnings to grow fast enough to absorb that:
The raise trims fiscal 2028’s $11.08 by about 55 cents at most.
And investors aren’t paying much for those earnings:
It was 14x at Monday’s close, against a five-year average of 21x. Today’s bounce barely changes that.
The coupons sting more, at up to 8.65%.
Oracle has to hit its cash flow date
The rest of the build has to come from Oracle’s own cash, and analysts expect less of it than Oracle does:
Oracle guided to more than $30 billion of free cash flow in fiscal 2029, more than twice the consensus. If that turn slips, Oracle either breaks its own cap or leans harder on customers.
TIKR tracks 41 analysts on Oracle. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Oracle, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Oracle’s Analyst Ratings
Where Oracle’s money goes
Oracle plans a 50,000-GPU cluster on AMD’s MI450 chips and Venice CPUs. AMD, up 5%, reports tonight, a read on whether orders like Oracle’s are ramping. Super Micro, up 4%, also reports tonight, after SambaNova announced a deal to build inference racks with it.
Vertiv rose 6% after Bernstein argued the market may have overstated the political risk to US data-center builds, Oracle’s included, ahead of today’s midterms.
Funded, and still cheap
At 14x, Oracle still trades as if the buildout won’t pay off. Now that it’s funded through fiscal 2030, that looks too pessimistic to me.
Of course, the free cash flow still has to show up, and December’s second-quarter report is the first real check.
So what is Oracle stock actually worth?
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Disclaimer:
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