2024年4月29日星期一

♟ TikTok Ban Will Hurt This Stock

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"Could ELF be next to follow the downside path of ULTA? If so, then mid-dated put options could be a smarter idea."

Bryan Bottarelli, Head Trade Tactician, Monument Traders Alliance

Bryan Bottarelli

Now that a bill to ban TikTok has passed by Congress, which companies could stand to lose the most?

To answer that question, let's first back up...

TikTok is the short-form video platform owned by Chinese company ByteDance.

It launched in 2016 - and exploded during the pandemic.

According to Statista, TikTok was downloaded globally around 984 million times in 2020.

Now that it's facing a ban, somewhere around 170 million social media users - as well as advertisers and content creators-may need to find a new home.

Where will they go?

For one, they could migrate over to Instagram's Reels - which was created to compete with TikTok content creators.

According to a Wedbush survey, 60% of TikTok users said that Facebook or Instagram would be their most likely alternative if TikTok does get banned.

But, to be realistic...

A ban (or even a forced sale) wouldn't happen quickly. ByteDance would need to divest TikTok within nine months. But still, the ramifications for some specific companies could be quite dire.

So, who stands to suffer the most?

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Notably, beauty and cosmetic companies could soon get delt a major blow – notably e.l.f Beauty's (NYSE: ELF) and Ulta Cosmetics (Nasdad: ULTA).

ELF was once a $10 stock best known for selling $1 makeup brushes.

But then, an explosion of "skin-fluencers" flooded TikTok with product reviews, beauty tutorials, and before/after videos – which reviewed the effectiveness of skincare products. And as a result, shares of ELF exploded. ELF shares now trade around $160 – and have gained 350% since 2022.

A big reason for the rally has been TikTok. It has allowed ELF to increase its revenue and market share by closing brick-and-mortar locations in 2019 and shifting to a more digital focus using TikTok as a marketing tool.

Is that gravy-train now about to end?

It could be a very realistic possibility.

Will ELF Soon Track the Downside Move of Ulta?
 
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Now that a TikTok ban is looming, ELF could lose this lucrative and effective marketing model. The same goes for ULTA, which is already started to trend lower – moving from $560 per share in March down to $400 here in late April. Could ELF be next to follow the downside path of ULTA? If so, then mid-dated put options could be a smart idea.

To see exactly how I'm playing developments like these, I invite you to check out The War Room. Last week I closed a 107.55% winner on SNAP in less than 1 trading day, and my colleague Karim closed a 128.31% winner on RILY in 143 trading days.

So if you're ready, click here to join a community of like-minded traders today.

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