甲骨文当前16倍远期市盈率相对标普500被低估，考虑到其AI驱动的增长和持续改善的现金流轨迹，当前价格提供了良好的入场点。

let's just talk about why you think Oracle is a buy here. I mean, it's off what, 26% year-to-date. What makes this such a good entry point right now?

If you want to look at the technical's for a really quick second because you're concerned about the downside and how rough a ride it's been this year, then you can look at somewhere in the low 100's to somewhere at around 160, 165.

That's the big trading range that it's stayed in. So, you could buy some here or you could buy some at 120 or 110 if it goes down a little bit, but it's trading at if I remember correctly, I mean, it's definitely it's definitely in the low 20's on a PE, no higher than that.

If I remember correctly, it might even be at this point below the S&P 500 on a forward price to earnings. This is a higher growth company than the S&P 500 in aggregate and it's going to be higher quality. It isn't today, but it's going to be.

If you look at the earnings, a couple things that you saw was not only better than expected sales and earnings coming from the right segments, the high growth AI compute segment, but you saw the company say moved from last quarter saying we expect $90 billion in fiscal year total revenue to this quarter saying at least 90.

Basically meaning we're flowing through this beat and we're tracking the way you saw on the quarter.

The CapEx is lumpy, they said that. They didn't guide for any higher CapEx than expected. You're still not getting a financing both debt and equity worse than expected.

So, basically with Oracle, what you have is is a company that is integral integral to AI where the earnings and cash flow numbers are tracking such that they're getting better and the CapEx and the need for financing numbers are not getting any more dire.

And to me, Oracle is worth way over the S&P 500 on a PE.

Right. So, it trades with a forward PE of 16 times. Look, we had a guest on post earnings who said the results were good, and they were good in the areas where you thought there might have been some concern, like the data centers, for instance.

But, not only are they building them, they're actually making money out of this stuff as well. There were some other bright spots, too, but I'm just wondering, Jacob, why is the market not buying this?

Because they were saying that it was a head scratcher the next day why this stock sold off.

One of the reasons I think Oracle is a buy right now, and why I actually don't think there's that much more downside to go. I mean, maybe it goes to 115 or 120 or whatever. It's really volatile stock.

So, on the upside, like, you're fine if you buy here, it goes down, and then you're at 200 later.

The point is, I think that the market actually is buying this story, and the stock has gotten hit in the last few days on some other issues. The first thing that happened was Thursday, uh, uh, uh, September 10th, the the post-market trading, the first reaction to the print and to the guide, which was on the print, was the stock going up 6%.

I actually know somebody that sold at 165. His cost basis was was much lower, so he trimmed a little bit, but you know, people fine. It was up 4% a little bit after it was initially up 6%, but the market reaction was fine.

And then on Friday, you get this news that Larry Ellison is canceling plans to sell millions of of shares, and the market's like, "Oh, well, he was going to sell millions of shares in the context of a company that needs to finance itself partly through issuing more stock." So, you know, that that weighed,

and then you get this news that Larry Ellison is canceling plans to sell millions of of shares, and the market's like, "Oh, well, he was going to sell millions of shares in the context of a company that needs to finance itself partly through issuing more stock." So, you know, that that weighed,

and then you get to Monday and it's down 5% partly partly because of that. There was there's a little bit of news flow on that over the last few days, but also on Monday, what happened?

Interest rates went up a little bit. Rates have moved up a little bit in the last few days. Obviously, oil and and the whole the whole macro situation, Oracle is particularly vulnerable to higher rates because it does have a high debt load right now.

Um and it's got a quite quite a burdensome capital structure in terms of the the amount of debt that it has.

So, it's got these it's it's you're getting higher rates, you're getting the the Larry Ellison news, but if you actually look at what happened to the stock when the company showed the earnings picture, it went up somewhere in the range of 4 to 6% and and when I couple that with the fact that all these issues that we're talking about are getting priced in.

It's trading at 16 times earnings with which is ridiculous and the fact that it's not breaking below 120 and it's in this range, I say go for it.

Okay, so there is a confluence of factors as to why this name is down versus perhaps some of the other so-called hyperscalers in an environment like that. How concerned should we do be about the current credit rating and of course the debt that it has taken on to fund all this stuff and the negative free cash flow?

I mean, do you think some of the concerns about this name are overblown or justified?

Well, yeah, I I I I I think to I think that they're justified from the perspective that the stock has actually gotten hit. I think that they're unjustified from the perspective of what Oracle is worth intrinsically.

I think I think if you believe in their story that they are that are that they've been proving out in the last couple of quarters, intrinsically, they're probably worth, you know, like I said, I you know, north of of 20 times earnings.

I'd have to draw it up, but not a below multiple company a below market company in terms of in In of the multiple.

I think where where there where you have to be careful and this is for the Bears, you know, you have a company that is that is pacing in terms of cash flow and earnings. I mean it burned less cash flow than expected, less cash than expected.

You have a company that is pacing in terms of cash flow such that the debt burden won't look that bad in a few years. The CapEx will die down and the capital structure will drastically improve because of the growth of sales and the scale of the profitability and the cash flows that are coming years down few a few years down the line.

Now, one of the risks to that story to the revenue to the earnings is that they're getting a lot of the revenue from Open AI. I think Open AI just got some financing earlier this year and I think like I think they're good for the money basically.

They have to pay Oracle over the over the course of their contract. But like if there's an issue with Open AI or the capital markets dry up and and there's a in the armor to the revenue or cash flow story, that's where the debt looks awful and that's where the Bears totally have an argument.

But I just I look at the whole picture and I think Open AI is good for the money in that contract. I think it's it's like $300 over the life of the contract. I think Oracle is integral to AI.

So as long as the build out continues, even if there are some fluctuations in how quickly it continues, I think you know, I think they lap the CapEx in the next few years. I think they lap the debt and the interest expense and I think that to get really technical for a second, I think that at some point three, four, five years from now, your EBITDA number is going to be totally satisfactory versus your your net debt dollars.

Jacob, I really appreciate it. Thank you so much for jumping on with us today and getting across all things at Oracle. Trading down 4 and 1/2% right now. Jacob Sonenshine, stock pick writer over at Barron's.