Microsoft stock is trading in the green today as the company’s deal to acquire TikTok’s U.S. operations now look imminent. Buying TikTok will expand Microsoft’s reach to an audience that was untapped before. Microsoft has been an enterprise software company for a long time. Now, it is pushing into the most lucrative audience – the millennials.
TikTok has around 100 million monthly active users in the U.S. That user base is bound to grow as more and more people join the social media platform.
Microsoft has successfully built a diversified business model, making it crisis proof. In the fiscal fourth quarter, Microsoft’s revenue from LinkedIn jumped just 11%, while advertising revenue fell 17%. But the company’s gaming revenue from Xbox jumped a whopping 68% at constant currency as people bought more consoles and spent more time playing during the coronavirus-related lockdowns.
Having TikTok will give Microsoft a strong advantage over its rivals like Facebook, Twitter and Alphabet. Each of its competitors are masters of their own domains which include social media and search engine. But Microsoft has its grasp over enterprise, productivity, gaming, jobs search, search engine and advertising.
Earlier this month, Wedbush’s Daniel Ives reiterated an Outperform rating for Microsoft with a $260 price target. The analyst said that Walmart’s plans to join Microsoft to acquire TikTok could be the “final piece” in the deal puzzle that could be valued at up to $40 billion.
The analyst said that Microsoft is the “White Knight” in the Tiktok deal negotiations, as no other company including Facebook, Alphabet, Twitter and Amazon have the capacity to tackle the huge price tag and political factors involved in the deal. Ives also said that Microsoft buying TikTok would be like “Christmas morning coming early” for investors. The analyst believes that this investment would pay off in the future.