Analysts at Canaccord Genuity reacted Thursday to President Biden’s signing of a law that could lead to a ban on TikTok in the United States unless parent company ByteDance divests the app. The law, signed on Wednesday, provides a twelve-month ultimatum for the sale. ByteDance is expected to legally challenge the new law, potentially starting a lengthy legal battle.
Analysts at Canaccord Genuity believe that although TikTok’s future in the US market remains uncertain, this development could be beneficial for other companies in the social media and digital advertising industry.
They pointed out that the uncertainty could dissuade advertisers from TikTok in the short term, while a potential ban or forced sale of the app, excluding its algorithm, could have positive long-term effects on user engagement and competitors’ advertising budgets of TikTok.
According to Canaccord Genuity, Meta Platforms, Inc. (NASDAQ: META), Snap Inc . (NYSE: NYSE:) and Alphabet (NASDAQ:) Inc. (NASDAQ: GOOGL, GOOG) are poised to take advantage of the situation. The company suggests that Meta could potentially attract the most significant portion of ad time and spend that could shift from TikTok. Furthermore, analysts note that any reallocation of advertising budgets on Snapchat could have a particular impact on the platform.
Additionally, analysts predict that YouTube, owned by Alphabet, could benefit from increased engagement. However, they also acknowledge that due to the large size of Google’s overall advertising business, the relative impact on Alphabet may be less pronounced than others. Investors will closely monitor ongoing developments as the market adjusts to potential changes in the social media landscape.
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Insights from InvestingPro
In light of recent legislative developments that could see TikTok subject to restrictions in the United States, Snap Inc. (NYSE: SNAP) appears to be in a position that could intrigue investors. According to the data Of InvestingProSnap has a market capitalization of $18.82 billion and trades at a high price-to-book multiple of 7.73, indicating a superior market valuation despite not being profitable over the past twelve months.
The company’s gross profit margin stands at 54.1%, reflecting its ability to retain a significant portion of revenue after accounting for the cost of goods sold.
Two advice Of InvestingPro Of note for Snap are its liquid assets, which currently exceed its short-term obligations, suggesting some degree of financial flexibility. Additionally, although Snap operates at a moderate level of debt, it’s worth noting that analysts expect the company to be profitable this year. This could be a crucial factor for investors, considering the potential increase in user engagement and advertising budgets that could occur if TikTok’s presence in the United States is limited.
For those looking for more insights, InvestingPro offers additional tips on Snap, which could help you make a more informed investment decision. Interested readers can get these insights and take advantage of a special offer by using the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year Pro and Pro+ subscription.
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