As March 2022 kicked off, investors braced for a ban on TikTok in the U.S. Since its launch in 2016, the Chinese content creation platform has become the definition of overnight success. According to recent statistics, it boasts over 1 billion monthly active users. That puts it significantly ahead of older platforms such as Snapchat (NYSE:SNAP), Pinterest (NYSE:PINS) and Twitter. However, the app may be on the verge of losing one of its biggest markets. A bipartisan coalition of U.S. lawmakers are considering a bill that would ban TikTok in the U.S. due to national security concerns. While this would be bad news for the Chinese company, it could mean significant opportunities for companies like Meta Platforms (NASDAQ:META). And one expert sees META stock as the biggest potential market winner.
Guido Petrelli is the founder and CEO of Merlin Investor, a multi-asset education and strategizing tool designed to provide retail investors with unique insights. As he sees it, a TikTok ban could potentially create significant ripples in the market. But it could also help other social media stocks gain a larger market share. Earlier this month, he spoke to InvestorPlace about the companies where he sees the most opportunity.
Petrelli’s Top Pick: META Stock
As Petrelli sees it, if the TikTok ban passes, investors should be considering where users will go. He notes that the platform offers short video reels and targets primarily Millennial and Gen Z users. This is correct. Data indicates that users between the ages of 10-19 make up 32.5% of TikTok’s U.S. user base. An additional 29.5% is comprised of users between 20 and 29. For these reasons, Petrelli believes that Meta Platforms is best positioned to benefit from a TikTok ban, as it includes multiple popular platforms. The combination of Facebook, Instagram and WhatsApp is central to his bullish case for META stock. As he tells InvestorPlace:
“I personally see Instagram today as the most close thing to TikTok [as it covers] the same target. Then also for those, let’s say, older user of TikTok, Meta will still be able to cover them through Facebook, they usually use for, let’s say, older people or not too young people. And WhatsApp, also starting to offer some reels, so it could also benefit. So overall, for me Meta, primarily thanks to Instagram, could be the first company, the first stock that could take advantage of the TikTok ban.”
Meta isn’t the only stock that Petrelli sees as having growth potential in a post-TikTok economy. But it is the company he considers to have the best chance of picking up the market share that the popular platform will leave behind. Behind Meta, he ranks Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) because its holdings include Youtube. He acknowledges that the user demand for video content will only increase if TikTok is banned.
Despite his stance that Instagram is the closest app to TikTok in terms of what it offers, Petrelli acknowledges that Snapchat may have the most similar audience in terms of age demographic. “Snapchat of course is a completely different side of the first two that I mentioned,” he notes. “But it could still take in some benefit from this ban.”
A Post-TikTok World
Other experts have expressed similar takes on Snapchat. InvestorPlace senior investment analyst Luke Lango has described the platform as the “closest analogy to TikTok,” citing its potential to usurp its user base. In August 2022, he predicted that if the regulatory scrutiny of TikTok continued, Snapchat could reap the benefits. Months later, that exact scenario is playing out, and SNAP stock is responding very well, though META stock is outperforming it by a slight margin.
Granted, Meta has other factors pushing it up right now. Experts are touting both its artificial intelligence (AI) and metaverse applications, two areas in which investor interest is high. However, Petrelli makes a sound case for why META stock may be the top beneficiary of a TikTok ban. The company has the dynamic reach to appeal to users across various age groups and the tools to provide them with the content they will seek if TikTok is banned.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.