I Can't Stay Quiet on Oracle Stock Any Longer

Hey, welcome back subscribers. This is my world of stocks. My name is Ali of course. Um, today we have to talk about Oracle stock here for a minute because um, when I look at how the market has sold down this stock and really just kind of all the fear and panic that continues to surround it to the point where it's starting to feel like people are are even kind of afraid to say anything optimistic about the company or the stock. Well, I'm just really starting to feel that the market and especially like some of the talking heads out there and even on some social media channels too just simply don't understand this company or the future potential that it's holding. Now, to each their own. You guys do your own research, make your own decisions. I'm just sharing my personal opinions on this. But it really does feel like the short-term traders have taken over the narrative at this point. And that's that, you know, this is a company that is just bleeding money on AI. they have no clue what they're doing and it's all going to end up, you know, kind of crashing and burning. But when I look at the at the stock price today, it's it's just really starting to feel to me like this is perhaps one of the best pickups right now in the entire market. And so I'm going to explain exactly why I feel that way in this video. And um we're just going to kind of run through it all today. So a big Oracle update here. Um hit that like button. Make sure you're subscribed if you enjoy updates like this on individual stocks. But yeah, let's just go ahead and jump into it. All right, so let's start with the stock price first here. Now, you're talking about a crash here that is literally the biggest by sheer volume that I've ever seen in this company's history. Now, granted, this is coming off a monster rally last year when Oracle was a market darling and everyone couldn't get enough of it. But mind you, I actually think that that rally was totally justified. And at first, I was kicking myself for not having purchased the stock earlier on when I knew it was a good deal. I knew that it had tremendous potential. But for whatever reason, I just kept holding myself back and sure enough it did soar to the room to the moon and like so many others I was left behind feeling dumb for not having trusted my gut and bought in. But then the stock came crashing right back down, losing over half its entire value in one of the again biggest crashes of its entire history. And now all of a sudden everyone hates it. Well, I don't and I'm actually buying in because I feel that the market has completely mispriced the situation. See, Oracle, similar to Microsoft, Amazon, Google, is what we call a hyperscaler, meaning that they run giant data centers while renting out insane amounts of computing power to other companies. And over these past couple years, the entire tech sector has been racing to build out all the infrastructure that is needed to power artificial intelligence. Well, Oracle specifically has been spending a fortune to do that. In fact, they just announced nearly $70 billion of capital expenditures for this current fiscal year alone in order to build out even more data centers in order to meet all the demand. And it's all that giant spending that has scared investors into crashing a stock that is only spending all of that money in the first place because of all the demand that they have. In other words, the business is absolutely on fire. So much so that they have to spend unimaginable amounts of money just to keep up with that demand. Yet, the market is actually punishing them for it. And look, I'm not saying that things can't go bad from here. There's always the possibility that AI turns out to be a fad that maybe nobody wanted and the bubble bursts and the entire economy crashes. But two things on that. Number one, I don't think demand for AI is going away anytime soon. When you look at how much it's improving business operations and how much every company out there is trying to get their hands on as much AI compute as they can, it's very clear to me that this is a transformative technology that is reshaping the entire business world that everyone is trying to adapt to. And number two, even if the bubble did burst, it would likely crash the entire stock market anyway. So, you'd probably have tons of other issues to be dealing with too than just, you know, this one single stock alone. So, I just don't get why someone wouldn't just buy the dip on this one here, too. Most of us already have several AI names in our portfolio anyway. So, I don't see what the big deal is about adding one more that happens to be a beaten down leader that is actually on fire in terms of business performance. And almost certainly trades at a much cheaper valuation than all those other AI stocks that we probably have. Last quarter, for example, Oracle showed that their remaining performance obligations, which is basically their backlog of guaranteed future revenue, skyrocketed by 363% year-over-year to a mind-blowing $638 billion. And for how much fear there is over their giant $70 billion spending plan, well, a massive $77 billion worth of those contracts will actually be collected this very year. Meaning that there is literally more revenue coming in from those contracts than their entire capex layout to begin with. And by the way, they have to expand. What else are they supposed to do? Just avoid all of these customers knocking at the door. Guys, around 98% of their AI data center capacity is already contracted out. It's why they're adding nearly 1 gawatt of new capacity next quarter alone. Because what's basically happening here is that any new capacity that is getting built is immediately being shipped right back out, getting leased out. And it's why we're seeing these incredibly strong results like their cloud infrastructure sales rising by 93% year-over-year. That's almost tripledigit growth for what is already a top provider in the world. And for all the talk about them being too heavily dependent on OpenAI, I mean, they're continuously signing new contracts with other customers all the time, too. In fact, they just locked in another giant 10-year contract with the Department of Defense worth up to $7 billion. That's a steady, highly reliable government revenue stream that has nothing to do with riskier AI startups. On top of that, Oracle has been pulling off what I consider to be one of the smartest strategic moves in cloud history. It's one of my biggest kind of bull points on the business in their multicloud strategy where instead of forcing companies to only use Oracle cloud, they actually partnered with AWS, Microsoft Azure, and Google Cloud so that their own database software can run natively inside their competitors data centers too. So if a company uses Amazon or Microsoft, they don't have to pack up and leave. they can just run Oracle database directly inside AWS or Azure with zero friction. This is why Oracle's enterprise software remains so incredibly sticky and their mode is so strong because they adapt and they partner up wherever necessary. Case in point, they signed another new partnership a couple weeks ago, this time with Google, so that they can integrate their Gemini AI models directly into their own AI agent studio, allowing enterprise customers now to be able to build custom AI agents using Google's best models right on top of their own private data that they store with Oracle. is what I've always argued about Oracle is that, you know, because you already have these existing giant databases where so much of the world's critical information is already stored. Well, you can now have all of these huge corporations simply run all of these new AI applications right on top of the database that they already trust rather than having to migrate, you know, decades of sensitive records over to an entirely new cloud provider. For most of them, this would be just much faster, cheaper, and more secure, too, most importantly, to just simply use Oracle instead. And we're already starting to see the benefits of that. It's why they've got so many huge customers on OCI like Meta, XAI, Uber, Bite Dance, even Nvidia, and more. And so, as Oracle grows larger, I just think that their platform will get even stickier over time, too. And while margins have been squeezed during all of this expansion, which I know terrifies all the short-term traders out there, but uh as a C CFO um noted, it's really only um supposed to be a temporary drop here to build all of these massive data centers. But those margins will rapidly start improving again once these um data centers are are in full operation. So, while I get the cause for concern, I just feel that I'm patient enough to wait for these operations to get fully fleshed out. And in the meantime, I get a historic crash in price that leaves them with a PEG ratio of less than 0.7, which is over 50% cheaper than the sector median because of all the the really high growth um uh uh projections out there from analysts for future years. And on top of all of that, I even get a nice little growth dividend to collect to all along the way. I know the yield is small at about 1.4%, 4%, but that's still higher than the S&P 500. And it's also got a tiny payout ratio, too, with double-digit growth and double-digit growth history. So, it'll likely get, you know, quite a bit bigger over time as well, especially over the longer term when profitability starts to pick back up. So, yeah, I just really like the stock here at these levels. I know many find it risky, but to me, it's just worth the risk. And apart from the entire market tanking, uh I'm not sure when else I would get a buy opportunity like this at this type of valuation for a company that is in my opinion this strong and still has so much more to do in the future. But hey, that's just me, my own personal take on Oracle. You guys uh can let me know how you feel about it down below. Do you think the market is overreacting to their data center spending or do you think the risks are simply too high here to to be um jumping in? Let me know down in the comments. And um hey, thank you so much for stopping by. I hope you enjoyed this update on the stock. Let me know which other stocks you'd like me to be talking about too. I can make videos on them. But um for now, I will catch you guys in the next video. Take care, my friends. Bye-bye.