1 Top Growth Stock Down 33% to Buy Hand Over Fist (Hint: It May Become a Multibagger)

Oracle (NYSE: ORCL) stock has been sliding ever since it released solid earnings a couple of months ago. Shares of the company hit a 52-week high on Sept. 10, the day following the release of its fiscal 2026 first-quarter results (which ended on Aug. 31).

It is worth noting that Oracle's stock price shot up more than 30% after releasing its previous report. Investors were buoyed by the company's rapidly expanding revenue backlog and the multibillion-dollar deals that it is signing, thanks to the fast-growing demand for its cloud infrastructure, which is being used for running artificial intelligence (AI) workloads.

However, the investor enthusiasm has faded in the past two months, and the stock is down 36% from its 52-week high. Let's see why that has been the case and then look at the reasons why it may be a good idea to buy Oracle stock following its recent pullback.

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Investors are doubting Oracle's prospects

When Oracle released its fiscal Q1 report, it noted a year-over-year increase of 12% in revenue to $14.9 billion. The company reported a much bigger increase of 359% in its remaining performance obligations (RPO) to a whopping $455 billion. RPO is the total value of a company's contracts that have yet to be fulfilled at the end of a period. So, this sizable backlog suggests that Oracle is on track to witness an acceleration in its revenue and earnings growth. This is precisely what the company pointed out at its financial analyst meeting last month.

Oracle has upgraded its fiscal 2029 revenue estimate to $185 billion from the prior expectation of $104 billion. It expects its top line to hit $225 billion in fiscal 2030. That points toward an annual growth rate of 31% from fiscal 2025's reading. Additionally, Oracle forecast 28% annual growth in its non-GAAP (adjusted) earnings through this period to $21 per share in fiscal 2030.

So, what has gone wrong with the stock? The first concern for investors is Oracle's mounting debt. The company had over $111 billion in debt at the end of the previous quarter. That was way higher than its cash position of $11 billion. What's worth noting is that Oracle is willing to take on more debt to fund the aggressive expansion of its AI infrastructure.

Now, expanding its AI data center infrastructure is important for Oracle to convert its massive backlog into revenue, and that will be critical for the company to achieve its long-term growth targets. The tech giant is reportedly looking to raise $38 billion worth of debt, a move that's likely to put more strain on the balance sheet.

Another reason why investors seem to have pressed the panic button is because of the company's reliance on OpenAI for a major chunk of its revenue backlog. The two companies unveiled a five-year, $300 billion contract shortly after Oracle's last earnings report. This deal seems to account for a significant chunk of Oracle's $455 billion RPO, considering that this metric stood at $138 billion at the end of fiscal 2025.

Wall Street is concerned about whether OpenAI will have enough money to fund the $1.4 trillion worth of computing capacity that it committed to buy from multiple providers, including Oracle. That's not surprising as OpenAI is expected to burn a whopping $115 billion in cash through 2029, according to tech news site The Information. However, CEO Sam Altman is confident of scaling the company's revenue rapidly in the coming years.

Investors may be pressing the panic button too soon

OpenAI aims to hit an annualized revenue run rate of more than $20 billion in 2025. More importantly, it is confident it will scale up its revenue into "hundreds of billions by 2030," as per Altman. The OpenAI CEO plans to branch into multiple areas, ranging from enterprise AI products to consumer devices and robotics to an AI handheld device.

The ChatGPT developer is also open to selling more equity to finance its purchase commitments, according to reports. Given that each dollar spent on AI-related solutions is expected to generate $4.60 in value, according to IDC, there is a good chance that OpenAI's upcoming offerings could indeed become a hit among customers as they look to boost productivity.

The company has been able to quickly scale up its revenue, having hit an estimated $10 billion in annual recurring revenue (ARR) earlier this year. For comparison, its ARR stood at $5.5 billion last year, as per reports. So, OpenAI is indeed growing its top line at an impressive pace.

Additionally, Oracle isn't just reliant on OpenAI for its backlog. The company points out that its multicloud database revenue is also growing at a stunning pace. Multicloud database allows Oracle's customers to run its database services in other cloud environments, such as those from Amazon, Alphabet's Google, and Microsoft.

The company saw a stunning rise of 1,529% in multicloud revenue in fiscal Q1. This explains why it is on track to build another 37 multicloud data centers, which will take its overall multicloud data center count to 71. As such, investors seem to be overreacting as there is enough room for Oracle to grow its business in the long run, especially considering that the productivity gains that AI is expected to deliver will help it eventually convert its backlog into revenue.

That's why it may be a good idea to buy this AI stock following its recent slide, as it is now available at a fairly decent 32 times forward earnings, a slight discount to the tech-laden Nasdaq-100 index's earnings multiple of 33. If Oracle maintains its earnings multiple after five years and hits $21 per share in earnings as per its internal estimates, its stock price could hit $672. That would be just over 3 times its current stock price.

That's why investors looking to buy a potential multibagger can consider using the recent slide in Oracle stock to buy more shares.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.