Here’s What a $1,000 Investment in Oracle Stock Will Be Worth by 2030
Key Points
Oracle expects to become free cash flow positive in the second half of fiscal 2028.
The company sees its free cash flow exceeding $30 billion in fiscal 2029, driven by its strategy of asking customers for prepayments or by telling them to bring their own hardware.
Oracle's earnings growth potential suggests that the stock could become a multibagger by 2030.
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Shares of Oracle (NYSE:ORCL) have underperformed the broader market this year, dropping 33% as of this writing, but the company appears poised for a strong finish.
The artificial intelligence (AI) infrastructure giant held its Investor Day on Oct. 28, and its shares surged 11% in a single session due to its impressive long-term outlook. Of course, Oracle has given back its gains amid the brutal market sell-off. However, the company sees impressive growth acceleration through fiscal 2030, which explains why investor confidence in Oracle stock is likely to improve.
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Let's take a closer look at Oracle's guidance through fiscal 2030 and see why this stock is poised for a major turnaround.
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Oracle's Investor Day presentation has eased concerns about its balance sheet
The primary reason for Oracle's underperformance this year is its debt. It has been raising money through debt and equity issuance to fund the aggressive build-out of data centers that handle AI workloads. As a result, the company's free cash flow has declined sharply over the past year and a half.
ORCL Free Cash Flow data by YCharts
However, Oracle estimates that it will become free cash flow positive in the second half of fiscal 2028. What's more, the company predicts more than $30 billion in free cash flow in fiscal 2029. It is worth noting that when Oracle released its fiscal 2027 Q1 results in September (for the three months ended Aug. 31), the company pointed out that customers funded a significant majority of the new contracts it signed during the quarter.
The company has been asking customers to make prepayments or bring their own hardware. This strategy will ease pressure on its cash flow. Not surprisingly, Oracle's data center infrastructure investments for fiscal 2028 are fully funded, as it noted in the Investor Day presentation. What's more, Oracle expects to bring its net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) below 3.5x by fiscal 2029.
A company with a net debt-to-EBITDA ratio between 1 and 3 is considered capable of servicing its debt payments. So, Oracle's guidance about its free cash flow profile and the debt seems to have assuaged investors' concerns about the health of its balance sheet. Moreover, the company has maintained its long-term growth targets.
It expects revenue to increase at a compound annual growth rate (CAGR) of more than 35% between fiscal 2026 and 2030. Even better, it sees non-GAAP earnings per share jumping from $8.10 in fiscal 2027 to more than $21.00 in fiscal 2030. That implies a CAGR of more than 37% for the next three years. Though analysts have become bullish regarding Oracle's long-term EPS growth potential, the company's guidance for the next four years indicates that it will outpace expectations.
ORCL EPS LT Growth Estimates data by YCharts
Importantly, Oracle has a solid enough revenue pipeline that should help it achieve its targets. The company ended the previous quarter with $664 billion in remaining performance obligations (RPO), up $209 billion from the year-ago period. Oracle expects to accelerate the conversion of this massive RPO into revenue, which should be a tailwind for its bottom line, since customers fund the majority of the new contracts it is signing.
The stock has multibagger potential
Let's say you have $1,000 in investable cash after paying your bills, meeting expenses, and saving enough for difficult times; buying this AI stock with that money seems like a no-brainer. We have already seen that Oracle's earnings could grow at a CAGR of almost 40% over the next four years. Now, Oracle trades at just 16 times forward earnings, lower than the tech-focused Nasdaq-100 index's forward earnings multiple of 21.
Assuming Oracle trades at 25 times earnings in 2030 and its earnings jump to $21.00 per share, in line with the company's guidance, its stock price will hit $525. That's 4x Oracle's stock price right now, which means a $1,000 investment in this stock will be worth $4,000 after four years. So, investors are getting a great deal on a solid growth stock right now, and they shouldn't miss this opportunity considering the multibagger gains Oracle is capable of delivering by 2030.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
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