ORCL: UBS Raises Price Target to $380—Grab It Now!

Oracle Corporation (NYSE: ORCL) has seen a remarkable surge in its share price over the past year, yet some analysts believe there is still significant upside. UBS recently reiterated a “Buy” rating and raised its Oracle price target to $380 (from $360) in mid-October 2025, arguing the stock is “too cheap” given Oracle’s strong cloud growth outlook (^[1]) (^[2]). Oracle’s market capitalization is now around $890 billion, after an ~80% one-year gain, and investors are clearly betting on the company’s aggressive expansion in cloud and AI services (^[1]). Below we deep-dive into Oracle’s fundamentals – from dividends and leverage to valuation and risks – to assess whether Oracle’s stock merits a buy at these levels.

Dividend Policy & Capital Returns

Oracle initiated regular dividends in the 2000s and has grown the payout steadily in recent years. During fiscal 2021–2023, its Board declared annual dividends per share of $1.04, $1.28, and $1.36 respectively (^[3]) – a roughly 8–24% year-over-year increase. In June 2023, Oracle raised its quarterly dividend to $0.40 per share (up from $0.32), translating to a forward annualized $1.60 per share (^[3]). At the current stock price, this amounts to a dividend yield below 1% (around 0.7–0.9%), which is lower than the technology sector average ~1.5% (^[4]). The relatively modest yield reflects Oracle’s preference for retaining cash for growth investments and share buybacks over an excessively high payout.

Importantly, Oracle has ample capacity to support its dividend. The fiscal 2023 dividend consumed about $3.7 billion of cash (on net income of $8.5 billion) (^[3]) (^[3]), implying a comfortable payout ratio in the 40% range. Even during a period of heavy capital expenditure, the company continued generating positive free cash flow sufficient to fund dividends. Rating agency Fitch estimates that after a near-term dip (due to a surge in data-center capex), Oracle’s “normalized” annual post-dividend free cash flow will be near $10 billion (^[5]) – indicating strong coverage of the ~$4 billion/year dividend commitment. In fact, Fitch expects Oracle’s dividend to “grow in line with profits”, with excess capital directed to buybacks (^[5]) (^[5]).

Aside from dividends, share repurchases have been a cornerstone of Oracle’s capital return policy. Prior to the 2022 Cerner acquisition, Oracle routinely bought back $15–$20 billion of stock annually, an aggressive pace that significantly reduced the float (^[5]). These buybacks were temporarily scaled back post-acquisition – net repurchases totaled only ~$2.5 billion in FY2024 and under $1 billion in the first half of FY2025 (^[5]) – as Oracle focused on deleveraging and integrating Cerner. Now, with earnings growing and debt stabilizing, Oracle may gradually resume larger buybacks. The company’s stated strategy is that capital not needed for acquisitions or debt repayment “will be returned to shareholders” (^[5]). In sum, Oracle’s dividend is well-covered and poised to rise modestly with earnings, while share repurchases remain an important lever for returning cash to investors (as evidenced by a new $20 billion buyback authorization announced in 2023).

_(Note: Oracle is a software company and does not report AFFO/FFO metrics, which are metrics typically used by REITs. Instead, we assess dividend coverage using free cash flow and earnings.)_

Leverage & Debt Maturities

Oracle carries a substantial debt load stemming from its acquisitive strategy (e.g. the $28 billion Cerner deal in 2022) and prior buybacks. As of the latest reports, total gross debt is in the tens of billions of dollars (Oracle does not disclose a precise figure in this report, but interest expense trends imply debt well above $70 billion). However, the debt maturity profile is well-laddered: Oracle has staggered maturities extending out to 2064 (^[5]), with relatively manageable amounts coming due in the near term. Specifically, only about $10–$11 billion of debt is due through fiscal 2026 (^[5]) (^[5]). The company pre-funded some of these obligations – in 2024 it issued new bonds to refinance its FY2025 notes (^[6]) – and holds a strong liquidity position to meet upcoming maturities.

Oracle’s liquidity includes roughly $11.3 billion of cash and marketable securities on hand (as of Q2 FY2025) (^[5]). Moreover, Oracle generates substantial cash from operations annually, and even after capital spending and dividends, it expects to have billions in surplus free cash flow. This financial flexibility gives Oracle multiple options to handle debt (refinancing, repaying, or rolling over) without straining its business. Fitch Ratings affirmed Oracle’s investment-grade credit rating (BBB, stable outlook) in early 2025, citing the company’s plan to refinance maturities and commitment to keep leverage at levels consistent with a solid BBB profile (^[6]) (^[6]). Fitch noted Oracle’s “strong financial flexibility” with its $10–$11 billion near-term debt coming due and robust cash generation to address it (^[6]).

Leverage metrics are elevated but trending in the right direction. Following the Cerner acquisition, Oracle’s gross debt/EBITDA spiked to roughly the mid-3× range. In fiscal 2023, interest expense was $3.5 billion (up 27% YoY) (^[3]), reflecting the higher debt balance, and Oracle’s EBITDA coverage of interest was comfortably above 3×. In fact, Oracle’s credit agreements require a minimum EBITDA-to-interest coverage of 3.0× (^[3]), a threshold the company easily meets (FY2023 EBITDA was on the order of $12–13 billion, about 3.6× its interest costs). Looking forward, deleveraging is underway: Fitch forecasts Oracle’s EBITDA leverage will improve to ~3.0× during FY2025 as earnings grow and debt stays roughly flat (^[5]). Oracle’s EBITDA margins are nearly 50% (^[5]), which means strong operating profit to support its interest obligations and future debt repayments. Overall, while Oracle’s absolute debt is high, its coverage ratios and refinancing outlook remain solid, and management appears committed to maintaining investment-grade credit quality.

Cash Flows & Coverage Ratios

Oracle’s cash flow generation has been a core strength, enabling it to fund investments, pay dividends, and service debt. In FY2023, operating cash flow was over $17 billion – about 202% of net income – reflecting the company’s strong conversion of earnings to cash (^[3]). Even after hefty capital expenditures (which have risen sharply to expand Oracle’s cloud infrastructure), Oracle managed positive free cash flow (FCF) for the full year. Notably, Oracle’s free cash flow in FY2023 equaled its net income (^[3]) (~$8.5 billion), despite integration costs and increased capex, demonstrating resilient cash generation.

That said, recent trends bear watching. Oracle is investing heavily in new cloud data centers and hardware to accommodate surging demand (especially from AI workloads). Capital expenditures have therefore spiked – one analysis pegged Oracle’s cloud infrastructure spend at $21.2 billion for a recent period (^[4]). This temporarily pressured FCF, even turning it negative in certain quarters (^[4]). Oracle’s free cash flow coverage of its dividend dipped in the short term as a result. However, this is largely a timing issue: management and analysts expect that these upfront investments will drive future growth, and as they normalize, Oracle’s FCF will rebound strongly. Indeed, Fitch projects post-dividend FCF should recover to roughly $10 billion annually on a normalized basis (^[5]) – comfortably exceeding the ~$4 billion/year dividend requirement.

Dividend coverage therefore remains robust when viewed on a forward-looking, normalized basis. Oracle’s current dividend represents only ~40% of its earnings and an even smaller fraction of cash flow in a typical year (^[3]). The company’s interest coverage is also solid: operating profits (EBIT) cover annual interest expense by well over 3×. Additionally, Oracle’s cash flow-to-debt metrics are on the cusp of improvement. While the surge in capex reduced the ratio of (CFO – capex) to debt into the “mid-teens” percentile recently (^[5]), Fitch expects this metric to rise above 20% as capex levels off and EBITDA grows (^[6]). In short, Oracle’s cash flows adequately cover its obligations – both to bondholders and shareholders – even though near-term free cash flow is temporarily subdued by growth investments. The company has prudently slowed share buybacks and new borrowing until its cash flow coverage metrics strengthen again (^[5]) (^[5]), a sign of financial discipline.

Valuation & Growth Outlook

After its massive rally, Oracle’s valuation is unquestionably rich by traditional measures. The stock currently trades around 72.5× trailing earnings (^[1]) – a multiple far above Oracle’s own historical P/E and well above the broader market. Even on a forward basis, Oracle’s P/E is elevated given consensus FY2025 EPS is still in the mid-single-digits per share. By comparison, mega-cap peer Microsoft trades at roughly 30× earnings, and the S&P 500 at ~20×. Oracle’s EV/EBITDA and price-to-sales ratios (estimated near 40× and 15×, respectively) also reflect a hefty premium. In simple terms, Oracle is priced for high growth and then some.

Why are investors (and UBS) still bullish at these levels? The answer lies in Oracle’s growth outlook, especially in cloud and AI services, which has dramatically improved in the past year. Oracle management has stunned Wall Street with ambitious long-term guidance. In September 2025, Oracle held an Investor Day where it projected FY2030 (five-year ahead) targets far above prior expectations. Oracle now forecasts $225 billion in total revenue by FY2030, with about $166 billion of that from cloud infrastructure (OCI), and earnings of roughly $21.00 per share (^[1]). For perspective, Oracle’s revenue in FY2023 was $57.4 billion (^[7]) and EPS was about $3.07 (^[3]) – so the company is guiding to nearly quadruple* its annual sales and profit in a few years. Oracle also revealed a backlog of over $500 billion in signed cloud contracts to support this growth (^[1]). These multi-year deals (some spanning a decade) include massive partnerships with marquee clients like OpenAI, Meta, and Elon Musk’s xAI, which chose Oracle Cloud for critical workloads (^[1]). Such wins suggest Oracle is emerging as a key player in providing AI cloud capacity, a niche with potentially explosive demand.

This rosy scenario underpins the valuation: investors are looking past current earnings and anchoring on Oracle’s future earnings power if it achieves these targets. Indeed, UBS sees Oracle’s execution so far as validation and asserts the stock remains undervalued relative to its growth trajectory (^[2]). At UBS’s $380 target price, Oracle would be trading at ~18× its projected FY2030 EPS – a much more reasonable multiple if one believes Oracle can hit $21 EPS (^[1]). In other words, the stock’s “sky-high” P/E of ~72 today (^[1]) might be justified by rapid earnings growth in coming years, compressing the P/E over time. Oracle’s premium valuation also reflects its improved business mix (nearly 80% recurring revenue now) (^[5]) and the “mission-critical” nature of its software, which tend to support higher multiples.

Still, it’s important to acknowledge that Oracle’s valuation leaves little margin for error. The stock is essentially priced as a high-growth cloud company rather than a legacy enterprise software firm. If Oracle’s cloud momentum stalls or its lofty FY2030 goals prove too optimistic, a significant valuation de-rating could occur. For now, however, the market’s confidence is reinforced by tangible metrics like Oracle’s accelerating cloud revenue (OCI sales jumped 52% in the latest quarter) (^[4]) and the unprecedented backlog of orders. These factors have led analysts like UBS to argue Oracle is “too cheap” given the magnitude of its cloud opportunity (^[2]) – an unusual claim for a stock at 70+ P/E, highlighting just how strong Oracle’s forward narrative is.

Risks and Red Flags

Despite Oracle’s strengths and optimism, investors should weigh several risk factors and red flags:

– Intense Cloud Competition & High Expectations: Oracle is battling giants in cloud computing – namely Amazon AWS and Microsoft Azure – which dominate the market. Even minor shortfalls can rattle investors when expectations are this high. For example, in late 2024 Oracle missed a quarterly revenue estimate by a fraction due to “intense competition” in cloud, and the stock plunged 7% in after-hours trading (^[8]). Oracle has tried to differentiate itself (even partnering with rivals, like integrating its database services with Azure/AWS clouds (^[8])), but sustaining outsized cloud growth in the face of such formidable competitors remains a key challenge. If Oracle cannot continue to win big deals or if cloud customers like OpenAI and Meta scale back, the company’s 2030 projections would be at risk.

– Heavy Investment & Leverage: Oracle’s cloud expansion requires enormous upfront investments. The company is in the midst of a $20+ billion capital expenditure cycle to build out data centers and capacity (^[4]). This has squeezed near-term free cash flow, even turning it negative in some recent periods (^[4]) – a potential red flag if the trend persisted. Oracle also carries a high debt load from past borrowings. Its debt-to-equity ratio is above 4.5× (^[4]), reflecting substantial debt against a relatively small book equity (which has been eroded by years of buybacks). While Oracle’s cash flows and investment-grade rating mitigate immediate concern, high leverage means less room for financial missteps. If interest rates rise further or if Oracle were to pursue another large acquisition, debt service could pressure its finances. Fitch has cautioned that if Oracle’s leverage stays above ~3.5× EBITDA and cash flow coverage (CFO-capex/debt) falls below ~15%, it would be a negative credit signal (^[5]) – essentially, Oracle must execute well to keep its balance sheet on a solid footing.

– Execution of Ambitious Growth Plan: Oracle’s multi-year growth targets (e.g. $225 billion revenue by 2030) are extraordinarily aggressive. The company is effectively forecasting ~17% compound annual revenue growth – for context, Oracle grew ~8% in FY2023 (^[7]). Achieving this will require flawless execution: onboarding huge workloads, delivering new cloud capacity on time, and preventing any significant customer churn. The $500+ billion backlog provides some visibility, but it assumes those contracts fully materialize. UBS itself notes that Oracle and its customers (like OpenAI, Meta, xAI) “need to deliver on these projections” for the bullish case to hold (^[1]). Any delays in cloud deployment, technology hiccups (e.g. if Oracle’s cloud can’t meet performance expectations), or downturns at key clients could derail the growth plan. There is also integration risk around Oracle’s acquisitions – for instance, realizing the promised synergies from Cerner in healthcare IT. To date, Oracle has executed well, but the margin for error is thin given how much is riding on the next few years’ performance.

– Valuation & Market Sentiment: Oracle’s stock valuation, as discussed, already embeds perfection. This leaves it vulnerable to sentiment swings. If macroeconomic conditions deteriorate or the tech/AI hype cycle cools, Oracle’s high-flying stock could see a sharp correction simply from a market re-rating of growth stocks. At ~70× earnings, any sign of growth slowing (even if still positive) might cause investors to rethink paying such a premium. In addition, high valuation could limit Oracle’s flexibility in using stock for acquisitions or compensation, and it raises the stakes on each earnings report. In short, Oracle is priced for high growth – a red flag in itself, insofar as it increases downside risk if growth disappoints.

– Governance & Leadership Concentration: Oracle’s corporate governance is dominated by its co-founder and Chairman/CTO Larry Ellison, who is now in his early 80s. Ellison owns over 40% of Oracle’s shares (^[7]), making him by far the largest shareholder with effective control over major decisions. His visionary leadership and deep industry relationships (e.g. with Tesla, OpenAI, etc.) have undoubtedly benefited Oracle – the recent AI deals can be partly attributed to his influence. However, this raises two concerns: (1) Succession risk – Ellison’s eventual departure (due to age or other reasons) could leave a strategic void, as no other individual has comparable sway or stature within Oracle. (2) Governance risk – such concentrated ownership means minority shareholders have little say, and there is limited independent oversight of management. Thus far, Ellison and CEO Safra Catz have managed the company successfully, but investors should be aware that Oracle is unusually dependent on one figure. Any unexpected change in Ellison’s involvement (or a governance misstep) would be a significant red flag.

In sum, Oracle faces a balancing act: it must continue investing heavily to seize a once-in-a-generation growth opportunity, while keeping its finances in check and delivering on sky-high expectations. The upside is real – but so are the risks if Oracle stumbles or external conditions change.

Open Questions

Finally, here are some open questions for investors to monitor as Oracle’s story unfolds:

– Can Oracle deliver on its 2030 cloud vision? Hitting $225 billion revenue and $21 EPS in five years would require execution at a level rarely seen in enterprise tech. Is Oracle truly on track to quadruple its business, or will these long-term targets be revised as time goes on?

– Will capital returns accelerate again? Oracle paused its massive share buybacks to digest the Cerner deal and invest in cloud capacity. With leverage coming down, will Oracle return to larger stock repurchases (as it did pre-2022, $15B+ yearly) or favor retaining cash for growth initiatives and possible strategic acquisitions?

– How durable is Oracle’s cloud advantage? Oracle’s recent cloud wins (especially in AI workloads) are impressive, but can it build a sustainable competitive moat? Will customers stick with Oracle Cloud for the long haul, and can Oracle continue to gain market share against the entrenched cloud leaders? In essence, is Oracle’s surge driven by a temporary niche demand (AI compute) or a broader, lasting shift in the cloud landscape?

– What happens if leadership changes? Oracle’s success has been closely tied to Larry Ellison’s vision and relationships. Looking ahead, how will Oracle manage succession planning for its top leadership? Can the next generation of management maintain Oracle’s innovative drive and aggressive strategy, especially without the singular presence of its founder?

These questions highlight that uncertainty remains, even amid Oracle’s strong current momentum. Investors should weigh the company’s robust cash flows and promising growth against the execution risks and valuation premium. Oracle’s story in the coming years will likely be defined by how well it answers these open questions – and that will determine whether today’s ~$290 stock indeed proves a bargain on the way to $380, or if the market’s enthusiasm overshot reality.

Sources: Oracle SEC filings, Fitch Ratings reports, Reuters and Investing.com news on Oracle’s financials and guidance, Oracle investor presentations, and analysis from financial media (^[3]) (^[5]) (^[1]) (^[1]) (^[8]) (^[7]). (All information is as of October 2025.)

Sources

1. https://in.investing.com/news/analyst-ratings/oracle-stock-price-target-raised-to-380-from-360-by-ubs-on-cloud-growth-93CH-5050552
2. https://insidermonkey.com/blog/oracle-orcl-price-target-lifted-to-380-at-ubs-firm-calls-stock-too-cheap-1630061/?amp=1
3. https://sec.gov/Archives/edgar/data/1341439/000095017023028914/orcl-20230531.htm
4. https://ainvest.com/news/oracle-orcl-dividend-reliability-2025-performance-high-conviction-income-growth-investment-analysis-2509/
5. https://tools.morningstar.ch/ch/stockreport/newsItem.aspx?id=TDJNDN_202501066785
6. https://tools.morningstar.ch/ch/stockreport/newsItem.aspx?id=TDJNDN_202409253920
7. https://moneyweek.com/investments/larry-ellison-net-worth
8. https://reuters.com/technology/oracle-misses-second-quarter-revenue-estimates-2024-12-09/

For informational purposes only; not investment advice.