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Dow Jones Flat as Microsoft Eyes All of TikTok, Demand Possibly Slows for Home Depot

By Timothy Green – Aug 6, 2020 at 2:44PM

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Microsoft is reportedly considering buying all of TikTok, and an analyst suggests sales at Home Depot weakened in July.

The Dow Jones Industrial Average (^DJI 0.45%) struggled to pick a direction on Thursday, up about 0.06% at 12:25 p.m. EDT. The number of initial unemployment claims was 1.186 million on a seasonally adjusted basis for the week that ended Aug. 1, down from the previous week but still far above normal levels. More than 31 million Americans were receiving unemployment checks in mid-July.

Treading water along with the market was Microsoft (MSFT -0.04%) stock, which was largely unmoved by a report suggesting the tech giant wants to acquire all of TikTok, not just the U.S. operations. Meanwhile, shares of Home Depot (HD 1.51%) were up modestly even as an analyst warned about a slowdown in demand in July.

TikTok logo.

Image source: TikTok.

Microsoft now looking to acquire all of TikTok

The Financial Times reported on Thursday that tech giant Microsoft had expanded its ambitions related to social media sensation TikTok. The company has been in talks with TikTok owner ByteDance over buying the U.S. operations of the social media app, a move that would quell concerns from the U.S. government regarding data privacy and the possibility of data being given to the Chinese government.

Microsoft is now reportedly aiming to acquire the entire TikTok business, which would include operations in India and Europe as well as the U.S. Such a deal would eliminate problems related to the app being split geographically. The price tag for a full acquisition of TikTok would likely be measured in the tens of billions of dollars.

It's unclear why Microsoft is interested in TikTok. The company's social media presence right now consists of LinkedIn, and it's mostly focused on enterprise software and cloud services. TikTok would give Microsoft a consumer app with hundreds of millions of users, but it's hard to see how it would fit in with the rest of company beyond some kind of tie-in with the gaming business.

Shares of Microsoft were essentially unchanged by early Thursday afternoon. The stock has soared 35% this year, but the market may not react well to a mega-acquisition that doesn't make all that much sense.

Analyst sees July slowdown for Home Depot

Home-improvement retailer Home Depot has enjoyed strong demand during the pandemic, particularly from do-it-yourselfers. The company posted a 7.5% rise in U.S. comparable sales during the fiscal first quarter, which ended on May 3.

That strong demand may have waned in July, UBS warned on Thursday. UBS said that data suggests the overall retail sales recovery slowed meaningfully in July compared with May and June, and that the slowdown impacted the home-improvement category. UBS also pointed to Google search trends data, which showed a drop in online searches for Home Depot and rival Lowe's in July.

UBS still believes Home Depot will beat estimates when it reports its second-quarter results later this month, due to a strong performance in the early part of the quarter. One lingering question: How much has economic stimulus in the U.S. juiced Home Depot's results? The federal supplemental unemployment benefit has now expired, and a new stimulus bill has yet to clear Congress. With less cash in consumers' pockets, spending across many retail categories could fall.

Shares of Home Depot were up about 0.4% by early Thursday afternoon despite the analyst commentary. The company is scheduled to report its second-quarter results on Aug. 18 before the market opens.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot and Microsoft. The Motley Fool recommends Lowe's and recommends the following options: long January 2021 $85 calls on Microsoft, long January 2021 $120 calls on Home Depot, short January 2021 $115 calls on Microsoft, and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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