Oracle could face a significant blow if the US government decides to ban TikTok, a popular social media app owned by ByteDance. As one of the main providers of cloud technology for TikTok, Oracle could lose a significant source of revenue if the ban is enacted. Analysts estimate that TikTok contributes between $480 million and $800 million to Oracle’s annual revenue, representing 1% to 1.5% of its total revenue. If ByteDance is required to sell TikTok to a non-Chinese company, Oracle could potentially lose its position as a cloud provider for the platform.
However, Oracle has the opportunity to redeploy its services elsewhere, given the high demand for cloud computing services, especially for artificial intelligence applications. This could mitigate the impact of losing TikTok as a customer. Additionally, Oracle’s stock has performed well in 2024, with a 32% increase despite modest revenue growth. The company’s cloud services business has shown strong growth, which has contributed to its overall positive performance in the stock market.
Although TikTok represents a small percentage of Oracle’s revenue, investors may be concerned about the potential impact of losing the social media platform as a customer. However, considering Oracle’s ability to adapt and redeploy its services, it may be premature to sell the stock solely based on the risk of losing TikTok. With a moderate level of debt and stable cash flow, Oracle’s stock appears to be fairly valued at present. Overall, investors may want to consider holding onto their Oracle shares, as the company has the potential to overcome the challenges posed by a potential TikTok ban.
Article Source
https://www.fool.com/investing/2024/06/27/tiktok-ban-would-hurt-oracle-is-it-time-to-sell-th/