If TikTok is indeed banned or sold, analysts with Morgan Stanley see Facebook parent Meta Platforms and YouTube, which is owned by Google, as the most likely to benefit. Meta stock gained slightly in Thursday trades.
A federal appeals court on Friday upheld a law that requires China-based ByteDance to sell TikTok to another company by Jan. 19, or the popular short-video site will be banned. President Joe Biden signed the law in the spring, prompting the legal challenge from ByteDance.
ByteDance has filed for a temporary halt to the ban pending a Supreme Court review. That could delay the ban if the Supreme Court agrees to hear ByteDance's challenge. It is also not yet clear if President-elect Donald Trump will try to keep TikTok active. He takes office the day after the law is scheduled to take effect.
With "the probability of a TikTok ban or forced sale seemingly increasing," Morgan Stanley analysts wrote in a client note Thursday, it is important to size up potential implications for other companies.
Facebook And Instagram Compete With TikTok
A TikTok ban or sale could create "significant time spent and monetization opportunity for competitors," the research note said.
Morgan Stanley analysts previously estimated that Americans spend 53 billion hours yearly on TikTok. Morgan Stanley analyst Brian Nowak wrote that Meta and YouTube would be the "largest beneficiaries" if TikTok users direct their time elsewhere.
Meta offers a similar algorithm-driven short-video product in Reels, which is available through Meta's Facebook and Instagram. YouTube hosts YouTube Shorts.
But Snapchat parent Snap, Reddit and Pinterest could also benefit, the Morgan Stanley note added.
Out of that group, Nowak added, "we would prefer to invest in Reddit, given its growing tools set to improve engagement, retention and ad performance."
Morgan Stanley upgraded Reddit to an overweight rating earlier this week.
Which Companies Could Benefit From Acquiring TikTok?
While the Morgan Stanley analysts made clear in the research note they have "no knowledge of any discussions," they offered a couple big name companies that could benefit from buying TikTok.
Nowak said Amazon could "make strategic sense" as a TikTok buyer. TikTok runs an e-commerce business through its app and also has an advertising deal with Amazon already.
"While execution to maintain and grow TikTok's users and engagement could be challenging (although Amazon could offer product discounts, faster shipping to drive users/engagement), we believe this relationship could be a positive for Amazon and its long-term advertising and e-commerce businesses," Nowak wrote. "Further, with Amazon's leading ad tools, attribution, and logistics capabilities, in this merger scenario, we see the potential for a formidable competitor to Google/Meta ad dollars."
Similarly, Walmart could "leverage TikTok across its omnichannel platform and contribute to its rapidly growing advertising business," in the view of the Morgan Stanley analysts. Walmart announced a deal to purchase a stake in TikTok along with Oracle in 2020, but the deal was shelved in the transition from President Donald Trump to Biden.
Microsoft also expressed interest in TikTok when Trump was pushing for a sale to U.S. investors in 2020. TikTok could still be a "strong fit," the Morgan Stanley note said.
Meta Stock: Three Day Winning Streak
Meanwhile, Meta stock was up a fraction at 634.25 in recent action. Shares notched another record high and have gained for three consecutive trading days.
Meta closed higher yesterday despite an outage that lasted several hours for some users of Instagram, Facebook and other Meta platforms.
Elsewhere, Reddit stock is up 1% at 167.40 in recent action. Shares of Google parent company Alphabet are down a half-percent at 194.15, pulling back slightly from a strong start to the week.
Amazon stock is up is trading flat at 230.21, hovering near record highs.
