A US judge has prevented the Trump administration from implementing its intended download ban on Tencent Holding’s (TCEHY) WeChat app. This means that Apple and Google were not required to remove the Chinese-owned app by Sunday evening.
WeChat, a messaging, social-media, and mobile-payment app challenged the constitutionality of the executive order which tried to prohibit (without defining) “transactions” relating to WeChat on September 20, 2020.
According to US Magistrate Judge Laurel Beeler in California, the court granted the motion in favor of WeChat “on the ground that the plaintiffs have shown serious questions going to the merits of the First Amendment claim, the balance of hardships tips in the plaintiffs’ favor, and the plaintiffs establish sufficiently the other elements for preliminary-injunctive relief.”
For instance, WeChat provides content (such as the news) in Chinese, which is critical for the many U.S. WeChat users with limited proficiency in English.
“Other platforms cannot practically replace WeChat because they lack the cultural relevance and practical interface with China and do not provide the integral connection that WeChat provides to the Chinese community” the order stated. (See Tencent’s stock analysis on TipRanks).
On September 18, the Department of Commerce announced prohibitions on transactions relating to Chinese mobile apps WeChat and TikTok, in order “to safeguard the national security of the United States.”
According to the department’s statement, the Chinese Communist Party (CCP) has “demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the U.S.”
It stated that the ban would help protect users in the U.S. by eliminating access to these applications and significantly reducing their functionality.
Indeed, CNBC reports that Commerce Department officials explained how the ban would have impacted the app: “Users will experience some dysfunction and latency to the point where there will be an outage or a message or something will timeout. So, we do expect it may be usable but it may not be particularly functional after Sunday,” a Commerce Department official said.
Shares in Tencent have surged 40% year-to-date, and the stock scores a bullish Strong Buy Street consensus. Meanwhile the average analyst price target indicates 15% further upside potential lies ahead.
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