With the September 20 deadline set by Trump for the sale of TikTok looming on the horizon, it turns out Microsoft’s (MSFT) offer has been rejected. The Chinese social app will instead become software giant Oracle’s (ORCL) “trusted tech partner” in the U.S.
On Sunday night, Microsoft stated that TikTok – owned by Chinese tech company ByteDance - had pulled out of the deal. Microsoft, in turn, has said it would have been a good fit for TikTok users, while at the same time alleviating the national security issues, which have been cited as the reason behind the proposed ban.
Wedbush analyst Daniel Ives has an idea why Microsoft’s offer fell through.
“We believe Microsoft would only buy TikTok WITH its core algorithm which the Chinese government and ByteDance was not willing to budge,” the 5-star analyst said. “Our view has been that Microsoft (along with Walmart) was in the driver’s seat to get a TikTok deal done for ~$30 billion+ given the strategic fit for its consumer business and the crown jewel asset/customer base this would give Redmond.”
Following the deadline date set by Trump, in a retaliatory move, the Chinese government updated its export rules, which included a ban on the sale of a number of technologies, including “personalized information recommendation services based on data analysis.” TikTok’s resounding success is based on such algorithms. Rumors so far indicate the Oracle deal is not a sale, but rather an agreement in which Oracle will handle TikTok’s U.S. user data.
Overall, Ives sticks to his MSFT Outperform rating, along with a $260 price target. Investors could be pocketing a 27% gain, should the target be met over the next 12 months. (To watch Ives’ track record, click here)
Overall, Wall Street’s confidence backing MSFT remains strong. The tech giant boasts a Strong Buy consensus rating based on 26 Buys vs. 3 Holds. There’s upside of 12% in the cards, given the $230.14 average price target. (See MSFT stock analysis on TipRanks)
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