International Business Machines Corp. IBM recently concluded a Blockchain trial involving Westpac and ANZ. The deal is related to the digitization of the bank guarantee process used for commercial property leasing of shopping center operator, Scentre Group.
Blockchain, mostly treated as a financial technology (fintech), is a kind of distributed database and works as an online ledger that cannot be altered or breached easily. The use of such technologies in the banking and finance sector is aimed at reducing the possibility of losing valuable data as well as minimizing the rate of cybercrime in the finance industry.
Notably, IBM is one of major players in the Blockchain market. This is the second significant deal for the company in this technology space, with the first being a multinational insurance policy piloted using the same technology with American International Group AIG and Standard Chartered PLC.
Its Blockchain initiatives coupled with the rapid adoption of the company’s artificial intelligence (AI) platform Watson will help the stock perform better. The stock has underperformed the S&P 500 on a year-to-date basis. While the index gained 9.7%, the stock lost 6.2% over the same time frame.
IBM’s Scope in Blockchain
Per MarketsandMarkets, the Blockchain market size is estimated to witness compound annual growth rate (CAGR) of 61.5%, from $210.2 million in 2016 to $2,312.5 million by 2021. In the report, 2015 has been considered as the base year, while the forecast period is 2016–2021.
Since Blockchain uses a distributed network and cryptographic transactions, it is difficult to tamper with the data. Consumers can use the network for safer transactions. Instances of hacking and double counting are also anticipated to be lower.
IBM is also combining Watson’s Internet of Things (IoT) platform with Blockchain technology, which will further enhance the technology. The Watson IoT Platform can add selected IoT data to a private Blockchain. The protected data is shared only with the business partners involved in the transaction.
International Business Machines Corporation Revenue (TTM)
International Business Machines Corporation Revenue (TTM) | International Business Machines Corporation Quote
We believe, with Watson’s growing rate of multi-industrial proliferation and Blockchain’s acceptance in the market, IBM is poised for structured growth. Its customer base is expected to grow, thereby boosting its top line going forward.
Zacks Rank & Key Picks
IBM currently has a Zacks Rank #4 (Sell).
Better-ranked stocks in the broader technology space are Applied Materials, Inc. AMAT and Agilent Technologies, Inc. A, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term growth rates for Applied Materials and Agilent Technologies are currently projected to be 16.6% and 9.7%, respectively.
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