Walmart is teaming up with Microsoft in an effort to close a deal on TikTok’s U.S. Operations. Michael Lasser, UBS Analyst, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss why Walmart would want TikTok’s U.S. operations and more.
BRIAN SOZZI: All right, Walmart is in play for a bid on TikTok, the company has confirmed to Yahoo Finance. Let's bring in UBS Retail Analyst Michael Lasser to see if this deal would make any sense. Michael, would it makes sense for Walmart and why?
MICHAEL LASSER: Good morning, Brian. I do think it would make some strategic sense for three reasons. First, the lines are blurring between physical commerce, digital commerce, and social media. And for Walmart to have some exposure to a digital media asset-- to a social media asset that would give them more exposure to that trend I think makes a lot of strategic sense.
Two, the TikTok audience tends to skew much younger, which contrasts to the Walmart customer base, which is a little bit older. So having the exposure to that younger audience would also be of strategic value to Walmart.
And finally, there is a lot of data and information that Walmart would be able to gleam as a result of seeing what trends are emerging in real time. It could soar its stores. It could soar its website and really connect more deeply to those trends. So we think there is some strategic rationale to Walmart being involved in a TikTok deal.
ALEXIS CHRISTOFOROUS: Now, we've seen Walmart go outside sort of its core before, its core business before, Michael, went it hooked up with Microsoft for a majority stake in India's Flipkart. We all know how that turned out. So do you think there anything Walmart could learn from that partnership that maybe can inform its decisions when it comes to TikTok.
MICHAEL LASSER: Absolutely. it's done this several times. To your point, Flipkart is a good example of that. It also created a partnership with JD.com in Asia that has also turned out to be very successful. So there's some clear precedents of Walmart doing this.
I think they're looking at those examples and saying that those were successful, we're willing to take the strategic risk, we've got plenty of capital, and this is the right time to do it. So I do see a lot of reasons they would move forward with this type of transaction.
BRIAN SOZZI: Michael, the way I think about it, this could have really profound impacts, really ripple across retail. And having said that, why-- if Walmart does get involved with TikTok, do you think Target should go out there and make a play for Snapchat?
MICHAEL LASSER: Well, I think what all traditional retailers need to do is take a step forward, think what's going to be happening next. And as the lines between commerce and social media blur, all retailers need to be positioned for that.
You know, I can't comment specifically on any other types of transactions of that sort. But I do think it's important for retailers to be positioned for these blurring lines and you know and have exposure to this emerging trend.
ALEXIS CHRISTOFOROUS: Michael, at the end of the day, is this just a play for big data? I mean, Walmart already has a lot of data on all of us. But they don't have data of the younger set. Is that something they would get in a TikTok deal?
MICHAEL LASSER: Well, it would be important to see how the deal was structured and what sort of protections are encased. But it is-- having access to data is one of the two critical frontiers of where the competition for retail will exist over the coming decades. It's going to be data and delivery. Those are what retailers will ultimately compete on.
And so Walmart needs exposure to be able to gain that data. You are absolutely right. They've got a lot of information on 20% of US households who regularly use Walmart for their weekly grocery shop. The more data it can learn about other cohorts that it's not deeply penetrated with, it would be to their advantage.
BRIAN SOZZI: Michael, you know this better than anyone. Walmart has had a, I would say, mixed history of these tech-type acquisitions, $3 for essentially an Apple higher. Jet, most of those assets have been written off. Flipkart, $16 billion has been a pressure deal for them. Do you think the Street would instantly embrace Walmart's stock if it were to buy TikTok in some capacity?
MICHAEL LASSER: Well, let's look at the evidence from the last couple of days. The stock's added about $20 billion in market cap since news came out that it acknowledged expressed interest in joining a transaction for TikTok. That's the best evidence we can point to say there is-- the capital markets want to see Walmart continue to push down this frontier of the blurring lines between physical commerce, digital commerce, and social media.
BRIAN SOZZI: All right, let's leave it there, UBS Retail Analyst Michael Lasser, good to speak with you.
MICHAEL LASSER: You you.