The European Union could be considering a TikTok ban.
Shares of Snap (SNAP 4.55%) were moving higher today on reports that the European Union could also move to block TikTok, following in the footsteps of recent proposed legislation in the U.S. And Snap shares continued to drift higher after last week’s strong first-quarter earnings report.
As of 3:07 p.m. ET on Tuesday, the social media stock was up 4.8% on the news.
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The clock is ticking on TikTok
Snap, the parent of Snapchat, and its social media peers have gotten a boost from recent legislation that could ban TikTok in the U.S. Investors seem to believe that such a move would push users toward alternatives like Snapchat.
Now, the E.U. seems to be considering similar legislation. According to multiple media reports, European Commission President Ursula von der Leyen was open to restrictions on TikTok, saying in a debate, “We know exactly the danger of TikTok.” That followed the commission’s second formal investigation into TikTok last week.
Separately, investors continued to push Snap’s stock up after last week’s impressive first-quarter results as it has gotten several upgrades since then.
The company delivered solid beats on the top and bottom lines in the quarter and gave better-than-expected guidance. It also continues to see solid user growth, indicating that the platform remains popular despite competition from the likes of TikTok and Instagram.
What’s next for Snap
Based on the stock’s movements, investors seem to think that Snap would be the biggest beneficiary from a TikTok ban, but that alone doesn’t seem like a good reason to invest. A ban is likely to take years to play out in the courts, and a divestiture — one alternative — might not significantly benefit the Snapchat parent.
However, if Snap can keep up its momentum from the first quarter, which included 21% revenue growth, the stock could easily move higher. The company still needs to make significant progress toward profitability on the basis of generally accepted accounting principles (GAAP), but the future looks brighter after the recent report.