Microsoft, TikTok, and Trading the Tech Giant

BY Chris Andreou

|August 27, 2020

Microsoft has been making headlines recently with an audacious move to buy social media giant TikTok.

With Donald Trump having signed an executive order to ban all transactions with ByteDance (the owner of TikTok) from mid-September, it appears that Microsoft is set to swoop in and save millions of dancing teenagers around the world from the clutches of the US president.

Users of the video-mashup platform were not the only ones who received the news well. Microsoft’s share price jumped a massive 4% a day after the tech giant confirmed it’s moving forward with talks to acquire TikTok’s operations in the US, Canada, Australia and New Zealand.

It’s easy to see why investors are giddy.

For Microsoft (MSFT), the combined users of TikTok and LinkedIn, which has 20% of US adults as users, would see it emerge as a bone fide giant in the world of social media to compete alongside top-dog Facebook. Microsoft purchased LinkedIn in 2016 for $26.2 billion. The purchase of TikTok is expected to exceed that amount.

But not everyone is as excited as the thousands of traders who have rushed to online platforms to buy and sell Microsoft shares since the news broke. Co-founder and recent loser of the world’s-richest-man status Bill Gates called the move a “poison chalice”.

“Who knows what’s going to happen with that deal,” Gates recently told Wired magazine. “But yes, it’s a poison chalice. Being big in the social media business is no simple game, like the encryption issue.”

“My critique of dance moves will be fantastically value-added for them,” he added. Tongue in cheek, one would hope.

Acquiring TikTok would also strengthen Microsoft’s position in the digital ad space, where they currently cede 70% of market share to Google, Facebook and Amazon.

TikTok is the fastest growing social media platform in the world.

Pandemic is A Double-Edged Sword for Microsoft

So far, the covid-19 pandemic has had both positive and negative impacts on Microsoft’s business.

The weak job market has hurt its LinkedIn business, with growth slowing to 11% year on year compared to 28% last year. Lower advertising rates have also seen it lose 17% of its expected ad revenue.

However, other sides of the business have certainly benefited from stay-at-home orders. Microsoft’s highest-growth activity during the most recent quarter was its Xbox console product and its related services, with a whopping 68% growth rate year on year.

The company also boasts strong fiscal year results. Total revenue was up by 13.6% to $143 billion, thanks in no small part to Microsoft’s cloud such as Office 365 and Azure according to CEO Satya Nadella.

Microsoft operates three main segments which break down as follows:

Microsoft’s stellar fiscal performance and potential decade-defining move to acquire TikTok has many investors bullish on MSFT as a stock to buy. Other analysts though have made it known they’ll be waiting to see if the stock has potentially plateaued before making a move.

In either scenario, Microsoft is one of the hottest stocks to track or trade right now. Thousands of canny investors are making use of the outstanding trading conditions, risk management tools and customer service offered by TIOmarkets to do just that.

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Chris Andreou

Experienced independent trader

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