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Oracle (ORCL) Introduces Cloud-Based Blockchain-as-a-Service

Zacks Equity Research
Updated

Oracle Corp. ORCL recently unveiled its blockchain services on cloud, after around two months of collaborating with Hyperledger, Linux Foundation’s open source underlying technology behind the blockchain build-up.

Oracle made the announcement of the launch on the first day of its OpenWorld conference in San Francisco. The company is following the footsteps of International Business Machines IBM and Microsoft MSFT in the blockchain market.

Notably, IBM, currently a dominant player in the blockchain market, also uses hyperledger technology for its blockchain applications and is a key member of the Hyperledger committee. Microsoft’s solutions on the other hand are built on Ethereum technology.

Oracle’s entry in the expanding blockchain market is anticipated to be a positive for the company’s top and bottom line and will boost shares going forward. Oracle stock has gained 28.7% year to date, outperforming the 26.7% rally of the industry it belongs to.

 

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Blockchain’s Increasing Adoption

The technology that originated for the purpose of cryptocurrency (bitcoin) trading and mining is gradually gaining ground in several other industries. It is primarily used for tracking transactions related to digital assets or documents, particularly in industries like banking, financial services and insurance.

The unique selling point (USP) of the technology is the assurance of secured data storage and transmission via its distributed ledger technology (DLT). The possibility of any data theft or security breach becomes less likely due to the decentralized system, where any change made in the records is visible by all parties involved in the transaction.

We note that IBM has already won several deals based on blockchain. The most recent ones being the “Car ewallet” contract with ZF Friedrichshafen and UBS and another one with global food suppliers.

Microsoft’s blockchain solutions is also witnessing increasing adoption as evident from the contract with Israeli bank Hapoalim as well as its Coco framework initiative built for the betterment of blockchain-based transactions.

Oracle’s Prospects in Blockchain

Most recently, in one of its articles, Next Big Future stated that Oracle estimates that 10% of the global GDP will be contributed by blockchain technology by 2027. Moreover, per MarketsandMarkets, the blockchain market is estimated to reach $2.31 billion by 2021 from $210.2 million in 2016 at a CAGR of 61.5%.

Oracle Corporation Revenue (TTM)

Oracle Corporation Revenue (TTM) | Oracle Corporation Quote

Though the market already has big players including the likes of IBM and Microsoft, we believe that Oracle has huge prospects in this segment given the rapid adoption of the blockchain technology across industries.

Zacks Rank and Key Pick

Oracle currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is Applied Materials, Inc. AMAT, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Applied Materials is 17.1%.

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