$330 billion ByteDance is too cheap.

$330 billion ByteDance is too cheap.

According to media reports, after resolving the long-standing regulatory issues surrounding TikTok’s US operations, ByteDance’s valuation logic is being reevaluated by the market.

On January 15, acclaimed technology publication The Information released an in-depth analysis written by Anita Ramaswamy and Jing Yang. The article points out that among highly-valued yet still private technology companies, SpaceX and China’s ByteDance are without a doubt the largest two. SpaceX has signaled its intention to go public this year, and now, with ByteDance having reached an agreement with the United States and resolved TikTok’s existential crisis, this Chinese tech giant seems to have a clear path to IPO in the coming years.

The article raises a thought-provoking point: The market’s current pricing of ByteDance appears to be overly conservative. According to Caplight data, ByteDance’s current valuation on the private secondary market is about $330 billion. Although investors set its value as high as $480 billion last November, it still looks “cheap” compared to Meta (Facebook’s parent company). To put it in perspective, Meta’s enterprise value has reached $1.6 trillion, and both firms have similar social media businesses, with annual revenues approaching the $200 billion mark.

The article argues that ByteDance’s share price also appears to be significantly undervalued. This “undervaluation” is especially striking considering ByteDance has already established itself as a leader in China’s AI sector. As the article states, in addition to its advertising business, ByteDance’s AI technology is driving the expansion of its cloud operations, even beginning to take clients away from giant competitor Alibaba.

Inverted Valuation: The Overlooked Growth Multiple

To understand why ByteDance is considered “cheap,” one needs to look at the actual financial data. Although the latest public financial statements are unavailable, Reuters reported that ByteDance’s revenue grew by 25% in the second quarter of 2025 to reach $48 billion, outpacing Meta’s 22% growth in the same period. If this momentum continues throughout the year, ByteDance’s total revenue for 2025 will approach $200 billion.

This sets up an intriguing mathematical question: If ByteDance sustains the same growth rate as Meta in 2026, then based on current valuations, ByteDance’s price-to-sales ratio (share price to sales) is less than twice its expected sales for 2026.

In contrast, Meta trades at seven times next year’s expected sales. Even slower-growing social media and ad companies such as Pinterest have multiples close to four. For another comparable – China’s Tencent, which also relies on digital advertising – Daiwa Capital Markets analyst John Choi notes that Tencent trades at 6.4 times next year’s projected sales.

Choi states bluntly in the article:

I believe ByteDance’s gains from AI investments should outpace its peers, including Tencent.

This suggests the market may not have fully priced in ByteDance’s potential in the AI space.

Profitability and Investment: Two Sides of the Coin

Of course, the valuation gap between ByteDance and Meta can partly be explained by profit margins. This is also a common concern among investors: how efficient is ByteDance at earning money?

The Information reported in April that ByteDance’s net profit margin in 2024 was 21%, while Meta’s net margin that year was nearly 38%. This gap is a factual difference. Additionally, executives at both companies have warned investors that large-scale investments in AI could lower profit margins.

However, this spending doesn’t seem to hinder ByteDance’s absolute profit growth. Bloomberg recently reported ByteDance’s profit could reach $50 billion in 2025, a 51% increase over 2024.

It’s like two racecars – one burns a bit more fuel (cost), but its acceleration (profit growth) is ramping up rapidly. In this scenario, focusing only on current fuel consumption and ignoring future speed potential is clearly unwise.

TikTok’s Uncertainty Settled: Premium Brought By Certainty

For years, one key reason for ByteDance’s discounted valuation was TikTok’s regulatory “black swan” in the US. This not only clouded the app’s future, but also blocked the company’s path to IPO.

But things have fundamentally shifted. According to CCTV News, under the agreement outlined by the Trump administration last September, ByteDance signed a deal to sell 80.1% of its US data security business to a consortium including Oracle, Silver Lake, and Abu Dhabi’s MGX. The deal satisfies a 2024 legal requirement that ByteDance’s ownership in TikTok’s US arm be cut below 20%, thus lifting the threat of a five-year US ban.

This regulatory certainty is extremely valuable. One ByteDance investor said eliminating regulatory uncertainty will make advertisers more willing to spend on TikTok and merchants more eager to sell on TikTok Shop. Given TikTok’s 170 million monthly active US users, its growth potential remains enormous.

As cited by analyst John Choi:

From the perspective of non-China advertisers, stability and visibility are paramount, so completing the US deal should greatly benefit ByteDance.

Is the Sleeping Giant About to Awaken?

For investors, the key question now is: after establishing the joint venture, how much profit can ByteDance still reap from TikTok? It’s a complex calculation. TikTok CEO Shou Zi Chew stated the joint venture will handle data protection and algorithm security, while ad and e-commerce businesses will remain with ByteDance. ByteDance will need to share revenue with the joint venture, which will pay ByteDance algorithm licensing fees but also saddle ByteDance with hefty data security costs.

Though the revenue-sharing specifics remain unclear, it does not alter the article’s core conclusion: even with these unknowns, ByteDance’s relatively low valuation makes it a highly sought-after IPO candidate.

Overall, the authors predict that with US regulatory hurdles eliminated, ByteDance’s IPO may be imminent.

Risk Warning and DisclaimerThe market involves risk, and investments should be prudent. This article does not constitute personal investment advice and does not take into account specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein are suitable for their own circumstances. Investing based on this article is at one’s own risk.