Blockchain technology in 2019 is expected to come out of the shadows of crypto currency like bitcoin. The technology is being rapidly adopted by a plethora of industries through the initiatives undertaken by tech giants.
It is well known that blockchain is much faster than legacy technologies in completing a transaction owing to the absence of manual processing or authentication by intermediaries. However, hacking issues have put blockchain’s security features under the scanner. Nevertheless, assurance of secured storage and transmission of data through a decentralized database is the most attractive feature of the technology.
Moreover, the system is transparent as well as incorruptible and meant to provide unaltered information. Since blockchain utilizes a distributed consensus, it is difficult to tamper with the records without being noticed by an entire network. These features make the system extremely secure. Additionally, the possibility of monetary losses is lowwith minimum chances of double counting and hacking.
Positive Growth Trends
Originally utilized for cryptocurrency transactions, technology giants like International Business Machines IBM, Microsoft MSFT and Accenture ACN are exploring various usages of blockchain to revolutionize the functioning of a number of industries. These include banking, retail, healthcare, logistics, utility and transportation among others.
The technology can be utilized to enhance smart payment systems, secure financial transactions, advance shipping and transportation, modernize government agencies and institutions as well as detect critical illnesses.
Per aOrbisresearch.com data as quoted by Reuters, blockchain technology is projectedto be used by 65% of enterprises by 2020. Further, per IDC data, spending on blockchain solutions is expected to surge 88.7% year over year to $2.9 billion in 2019. Also, spending is expected to witness a CAGR of 76% between 2018 and 2022 time frame and reach $12.4 billion.
Overall, the integrated use of the technology can enable countries to achieve higher economic output with smarter cities and simplified day-to-day systems in a cost-efficient manner. In fact, per a latest Cisco study, 10% of global GDP is estimated to be stored on blockchain by 2027.
Tech Giants Gaining Footprint
The significant growth opportunity is attracting tech giants into the blockchain market. Apart from dominant players like IBM, Microsoft and Accenture, software providers like SAP SE SAP and social media giant Facebook FB have joined the industry.
The tech majors are investing heavily to capitalize on the robust growth prospects.They are leaving no stone unturned to infuse artificial intelligence (AI), machine learning (ML), deep learning (DL) capabilities to enhance their prowess.
On a year-to-date basis, each of the companies have outperformed S&P 500 index.
Year to Date Price Performance
Let’s delve into some of the latest blockchain initiatives of these tech companies.
IBM Dominates the Blockchain Market
An early provider of the blockchain technology, IBM uses Hyperledger technology for blockchain applications.As it is a key member of the Hyperledger committee, the company gains prior notification of any changes in the underlying infrastructure. This is the primary reason for the company’s increasing number of deal wins in the space.
Notably, IBM has been selected by the likes of Walmart WMT, Unilever, American Association of Insurance Services (“AAIS”) and Maersk for designing blockchain networks.
Moreover, broad-based availability of recently announced IBM Blockchain World Wire —a blockchain driven global payments network — is a key catalyst. The network, aimed at accelerating and optimizing cross border payments, is witnessing robust adoption.
IBM has a Zacks Rank #3 (Hold). The company delivered an average positive earnings surprise of 1.4% in the trailing four quarters.
Facebook Creates New Blockchain Division
Reportedly, Facebook has created a new blockchain division to explore the benefits across its operations. The company is rumored to launch its own cryptocurrency that will be based onthe technology. We believe that the company is more likely to use blockchain to enhance data tracking and address the fake-news menace with improved security systems.
Recently, the company acquired Chainspace to add blockchain capabilities. Per sources, it is looking for new talents (around 22 people) to strengthen the blockchain division. Facebook is looking forward to instill blockchain-based authentication for website log in.
Currently, Facebook has Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company pulled off an average positive earnings surprise of 13.5% in the trailing four quarters.
SAP’s Efforts Are Commendable
The company’s SAP Cloud Platform Blockchain solution supports Hyperledger fabric, multiple-chain nodes and Quorum nodes. The system enables enterprises to innovate and develop robust blockchain tools. The solution was recently selected by Bumble Bee Foods.
Also, the company is developing a blockchain-based solution in collaboration with Boehringer Ingelheim to track pharmaceuticals throughout the supply chain. This will be a notable step to counter abuse of drugs.
Notably, the SAP Leonardo solution integrates Internet of Things (IoT), Big Data, ML, analytics and blockchain capabilities on the SAP Cloud platform. The solution has been witnessing traction of late. In fact, Barclaycard —a division of Barclays PLC — selected SAPLeonardo solution in the last reported quarter.
This Zacks Rank #2 stock has delivered an average positive earnings surprise of 1.2% in the trailing four quarters.
Microsoft: A Notable Challenger
Microsoft’s Azure-powered blockchain solutions are gaining strong adoption. The flexibility in usage and its secure broad-based availability are major growth drivers. Reportedly, Azure is enabling French conglomerate LVMH leverage blockchain platform to track and authenticate its pricey products.
Moreover, the acquisition of GitHub, touted to be the largest open source repository, provides Microsoft ample exposure for the development of robust blockchain tools.
The above factors are likely to provide an edge to this Zacks Rank #3 stock over cloud rivals like Amazon Web Services (AWS) and Alibaba Cloud that are eyeing the blockchain-as-a-service market.
Microsoft has delivered an average positive earnings surprise of 9.3% in the trailing four quarters.
Accenture’s Presence Can’t Be Ignored
Accenture’s initiatives in this space are backed by its motto of “Blockchain needs to adapt to an imperfect world”. The company provides ‘Editable Blockchain’ and has been awarded with a patent for the same. Also, the company is a member of the Enterprise Ethereum Alliance and the Hyperledger committee.
Recently, Accenture rolled out blockchain-based capability— circular supply chain — in collaboration with Everledger, Mastercard, AWS and Mercy Corps.The circular supply chain application is aimed atproviding enhanced transparency in production and assisting small-scale producers with sustainable practices to boost financial inclusion.
Accenture has a Zacks Rank #3 and pulled off an average positive earnings surprise of 4.6% in the trailing four quarters.
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