Here’s what Wall Street is saying — and American businesses at risk of contagion

Here’s what Wall Street is saying — and American businesses at risk of contagion

Top line

These publicly traded companies are most at risk if legislation is passed to ban TikTok in the US unless the social media company’s Chinese parent transfers the social media platform to an American owner, according to analysts.

Key facts

Perhaps the most significant impact of a TikTok ban or forced sale by TikTok owner ByteDance is the potential for the Chinese government to retaliate against the business activities of American firms in China.

Rosenblatt analyst Barton Crockett says he has some concerns An apple if China “retaliates” while the potential for Congress to investigate other China-based apps like Temu and Shein could hurt Meta given that 10% of Meta’s ad revenue last quarter came from Chinese discount retailers and there are risks to Amazon as about half of the third-party e-commerce partners are from China.

Wedbush analysts, led by Dan Ives, identified Apple and Tesla Apple and Tesla are among the major U.S. firms most reliant on China, with greater China accounting for 19 percent and 22 percent of Apple and Tesla’s respective global revenue in their most recent fiscal years.

Perhaps the company most directly affected by the TikTok ban is TikTok’s US data provider Oraclewhich likely enjoys a revenue stream of about $1 billion from its TikTok business based on Alibaba’s revenue losses and Oracle’s sales growth as TikTok’s data operations migrated to Oracle, Bernstein analyst Mark Moerdler posited in note from thursday.

However, Moerdler noted that Oracle’s fair valuation “will not be affected” as high growth in its data center business more than offsets the potential loss of TikTok.

Contra

On a positive note, Crockett identifies Meta, parent of Instagram reels, parent of YouTube Shorts Alphabet and Spotify as potential winners of the roughly 10% of US ad revenue currently captured by TikTok. Ives reveals the potential of Apple, Oracle or Microsoft to be in the mix as investors if TikTok’s US operations do in fact change hands.

News Peg

TikTok brought in $16 billion in sales in the US last year, the Financial Times reported on Friday. That’s about three times the US revenue brought in by Spotify last year, five times the North American revenue generated by Snap last year and six times the US sales amassed by X in 2021, the entity formerly known as Twitter’s last full year as a public company. Digital ad giants Alphabet and Meta brought in $146 billion and $61 billion in their respective US and US-Canada regions last year.

A big number

268 billion dollars. This is the latest reported internal valuation of privately held ByteDance. That’s almost exactly equivalent to the market capitalization of Netflix, the world’s most valuable entertainment company, but far less than Alphabet and Meta’s $1 trillion-plus valuations.

Key background

The House of Representatives passed a bill on Wednesday that would require ByteDance to give up or force the removal of the wildly popular TikTok from Americans’ devices. TikTok, the wildly popular short-form video app best known for its highly customized content algorithms, faced similar challenges in 2020 under then-President Donald Trump, who now opposes the ban. Criticism of TikTok has largely centered on the threat posed by the Chinese government’s access to the data of roughly half the US population, even though TikTok claims to operate completely independently of the Chinese Communist Party. Both Apple and Tesla reported year-over-year declines in their usually fast-growing China businesses in their most recent quarters, contributing to the companies’ recent underperformance in the stock market.

More information

FtTikTok’s US revenue hit $16 billion after Washington threatened a ban
MORE FROM FORBESTrump’s Treasury chief Steve Mnuchin says he’s assembling group to buy TikTok and avoid ban
MORE FROM FORBESTikTok ban: When it can happen and who can stop it

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