After reviewing Oracle’s results and posting an article comparing our past operating forecasts to the company’s actual results, we have refreshed our valuation assumptions and revalued the company.
Long story short, the present share price is sitting at about the average of all our valuation scenarios. We hold a modestly-sized, unlevered position in the shares and if the stock was to continue to be caught in the recent FAANG downturn, we would view this as an excellent opportunity to increase our position size (buy buying the shares or selling ATM puts) and our leverage profile (by adding ITM calls for instance).
We believe that the most likely valuation outcome is actually toward the high end of the range, but because actual revenue growth has been closer to our worst-case projections, we are not pounding the table to buy at the present levels.
I will post another note about the thinking that has gone into this valuation, but for the time being, here is our updated model:
The Waterfall is below, and we will be talking about Oracle in this week’s Office Hour sessions.