Oracle’s stock (NYSE: ORCL) has lost approximately 15% YTD as compared to the 18% drop in the S&P500 index over the same period. Further, at its current price of $74 per share, it is trading 15% below its fair value of $87 – Trefis’ estimate for Oracle’s valuation. The technology giant surpassed the consensus estimates for revenues and earnings in the fourth quarter of FY2022 (FY June-May). It posted total revenues of $11.8 billion – up 5% y-o-y. It was driven by a 3% increase in the cloud services & license support revenues, followed by an 18% rise in the cloud license & on-premise license revenues. On the expense front, the operating expenses as a % of revenues increased from 60% to 62% in the quarter. Further, the non-operating expenses and income tax was higher than the year-ago period. Overall, it led to a 21% y-o-y decline in the net income to $3.2 billion.
The company’s total revenues improved 5% y-o-y to $42.4 billion in FY 2022. It was mainly driven by a 5% growth in the cloud services & license support revenues, followed by a 9% rise in the cloud license & on-premise license segment. On the flip side, the operating expenses as a % of revenues jumped from 62% to 74%. Further, the non-operating expenses and effective income tax increased in the year. Altogether, it resulted in a net income of $6.7 billion – down 51% y-o-y.
Moving forward, we expect the top-line to see positive growth in Q1 FY2023. Notably, the consensus estimates for Q1 revenues and earnings are $11.3 billion and $1.08 respectively. All in all, Oracle revenues are estimated to touch $45.5 billion in FY2023. Further, ORCL’s net income margin is likely to remain around 31.4% in the year. It will likely result in a net income of $14.3 billion and an annual EPS of $5.39. This coupled with a P/E multiple of just above 16x will lead to the valuation of $87.
|S&P 500 Return||-1%||-18%||75%|
|Trefis Multi-Strategy Portfolio||-3%||-18%||225%|
 Month-to-date and year-to-date as of 9/7/2022
 Cumulative total returns since the end of 2016