“Given the amount of content on that channel with the amount of marketing that’s being spent to drive more users there’s a virality that is driving this asset to be worth over a period of time $100 to $200 billion,” says Wall Street Analyst Alex Zukin. “That’s why we think that for Oracle to invest at a $7.5 billion stake for a company potentially worth $60 billion today (and $200 billion later) could be compelling and add value to the share price.”
Alex Zukin, RBC Capital Markets, discusses why Oracle investing in TikTok is a real opportunity of the company to change the narrative and be relevant and exciting:
It does appear to us the Oracle has a real opportunity to change the narrative for the company. A narrative that has to do with growth, that has to do with cloud, that has to do with being relevant and exciting again. That is a really interesting opportunity again to add shareholder value.
Oracle is a fiesty competitor. Never underestimate Larry Ellison if he wants to get into a market. It started with the announcement that Zoom is a customer earlier this year. That was a big deal. That was really their first highly relevant actionable customer win that stood out to us. They are compounding their gains if they are able to successfully add TikTok.
When Oracle is looking for opportunities to change the narrative the fact that it is looking at this rather than potentially large scale M&A suggests that the valuation environment may not be one that supports that type of path right now. This is definitely an innovative construct to change the relevant narrative for the company.
The data indicates that the kind of engagement that this app is driving is not just unique but in the history of applications in internet software difficult to replicate. The amount of people that spend more than ten minutes, more than 30 minutes, or more than an hour engaging is very different than most established apps. Not just the amount of people that are engaging but the amount of time and the amount of people that are engaging over a certain amount of time.
It’s always possible that these types of things can be replicated with enough investment over a big piece of time. But the truth is right now given the amount of content on that channel with the amount of marketing that’s being spent to drive more users there’s a virality that is driving this asset to be worth over a period of time $100 to $200 billion. That’s why we think that for Oracle to invest at a $7.5 billion stake for a company potentially worth $60 billion today could be compelling and add value to the share price.