24/7 Wall St. Insights
- TikTok is still on track to disappear in the United States in the coming year.
- Snap Inc. (NYSE: SNAP) stock could get a boost if even a modest number of users switch to Snapchat.
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Snap Inc. (NYSE: SNAP), perhaps the most beaten-down social media stock traded on any U.S. stock exchange, could have the best run ever if the government pushes TikTok out of the market because of its possible affiliation with the Chinese government.
President Biden signed a law just over two months ago that stipulated TikTok would have to be sold or closed in the United States within a year. Court challenges that go beyond the middle of 2025 could extend that period. However, an essential barrier to TikTok’s ability to operate as a Chinese-owned company exists.
TikTok does not disclose its user figures. Estimates put it at just above a billion, making it half the size of Facebook. Yet, those are global numbers and don’t measure its reach in the United States. Snap’s comparable figure is about 400 million.
It is only possible to guess how many TikTok users would move to Facebook, Instagram, and Snapchat if TikTok were unavailable. However, if even a modest number moved to Snapchat, it could save Snap’s shareholders from years of disappointment.
In its most recent quarter, Snap’s revenue was $1.24 billion, up 16% from the year earlier. It lost $248 million, an improvement from a loss of $337 million the year before. Revenue estimates see it rising no more than 16% in the current quarter.
The poor quarterly results pushed Snap’s share price down sharply. It is off 43% this year, compared to an increase of 18% for the S&P 500. There are no catalysts other than that one to help Snap’s prospects. TikTok has to be kicked out of the United States.
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