Oracle Corp (NYSE:ORCL, ETR:ORC), the tech giant, could suffer up to nine months of headwinds should TikTok be banned in the US, analysts believe.
TikTok, which uses Oracle as its primary US cloud infrastructure provider, is facing a potential ban in the US being should owner ByteDance refuse to divest its ownership of the app.
UBS analysts argue a divesture could “net out roughly neutral” for Oracle, while a ban could lead to between six and nine months of headwinds for the Oracle Cloud Infrastructure (OCI) division.
Predicted headwinds could begin taking effect as soon as the quarter to February 2025.
“In a TikTok ban or shut-down scenario, Oracle would lose what is likely its largest OCI customer. This would be a negative, there is no sugar-coating it,” analysts at the bank explained.
Nevertheless, UBS believes that Oracle’s share price performance in the last month, down around 11%, means the market has already baked in a good portion of the TikTok risk.
In total, the Swiss bank predicts TikTok pays Oracle around US$650 million annually, but notes that other researchers have estimated the figure to be as low as US$200 million.
UBS said: “The bulk of the TikTok ramp on OCI occurred throughout 2022 and has levelled off since, suggesting that TikTok has not been a major driver of OCI’s y/y revs growth in recent quarters.”
Oracle is rated a 'Buy' and UBS targets a US$150 share price, representing around a 30% premium to its current value.