Larry Ellison’s wealth continued falling this week as concerns about the artificial intelligence industry dented Oracle (NYSE:ORCL), the company he controls.
Larry Ellison’s Net Worth is Falling
Bloomberg data shows that Larry Ellison is one of the biggest losers among the world’s billionaires, with his net worth down $194 billion over the past 12 months. He is now worth $178 billion, which makes him the eighth richest person in the world. His fortune fell by $6.1 billion on Friday alone.
Oracle has been one of the worst-performing big-tech companies in Wall Street, falling by 62% from its peak. As a result, its market capitalization has dropped by $550 billion, moving from $875 billion late last year to $387 billion today.
Oracle’s bonds have also sold out this year, with investors demanding a higher yield. Bonds maturing in 2036 are yielding 7.8%, up sharply from the year-to-date low of 5.3%. Another $2.75 billion maturing in 2066 is yielding 8.73%.
Investors have remained concerned about Oracle’s soaring debt load and its exposure to OpenAI, which signed a $300 billion deal tied to the Stargate project. Its total debt has jumped to $169 billion from $88 billion early last year. With its bond yields rising, it will now need to spend more money on interest.
Oracle is also facing challenges in its Project Jupiter in New Mexico. It has already issued a force majeure on this project, citing the ongoing power and gas pipeline issues. The New Mexico State Land Office rejected the Green Chile pipeline permit in July, citing water use, carbon dioxide emissions, and limited state benefits. It is also facing a separate air quality permit issues.
Oracle’s Business Continues Doing Well
Despite these challenges, Oracle’s business is doing well, while its valuation has become attractive. Its last results showed that its revenue jumped by 30% in the first quarter to $19.3 billion, with its cloud infrastructure revenue rising by 121% to $7.4 billion. Cloud apps revenue rose to $4.2 billion, while its RPO jumped to $664 billion.
Oracle’s revenue growth is expected to continue rising. After making $67 billion in the last financial year, analysts expect that it will generate $90 billion this year and $117 billion next year. Its earnings-per-share is expected to rise from last year’s $7.63 to $8.14 this year.
Its valuation has become attractive, especially for risk-taking investors. It trades with a forward price-to-earnings ratio of 15.7, much lower than the technology sector median of 21. Its rule-of-40 multiple when using the GAAP operating margi is 64%, making it highly attractive.
Benzinga data shows that analysts are highly bullish on Oracle shares, with the average price target being $252, up by 97% from the current level. It has 24 buys, 1 strong buys, and three holds.
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