3 Social Media Stocks to Buy on the Dip

The rise of social media over the past decade has been swift and very rewarding for early investors. Data has become a new digital currency, with major social media companies finding innovative new ways to gather, use, and sell the information its users provide daily. With so many aspects of our lives shifting online, it makes sense that social media stocks offer attractive investment potential going forward. This is particularly true for companies that are utilizing online advertising and e-commerce to grow their businesses.

If you are bullish on the social media industry, keep in mind that some stocks in the sector are currently vulnerable to headline risk. Investors need to be very selective when it comes to buying social media stocks at this time, particularly with the imminent election and continued controversy related to censorship. We’ve taken care of some of the due diligence for you and put together a list of 3 social media stocks to buy on the dip below.

Snapchat (NYSE:SNAP)

This stock is one of the more underrated social media companies to consider adding at this time. It is a company that operates a social networking application called Snapchat which allows users to post and interact with videos and images. Snapchat users are extremely loyal, with over 238 average million Daily Active Users and 4 billion snaps created every day. Snapchat users reportedly opened the application over 30 times every day in Q2 2020, which confirms just how devoted its users are.

The company reported some impressive numbers in Q2, including a 17% year-over-year revenue increase and a 17% increase in daily active users. Although Snapchat reported a Net Loss in Q2, its improving cash flows and investments in growth are both positives. Snapchat is also interesting because it provides advertisers direct access to a younger demographic. The company is also spending on augmented reality and continues to launch new features to attract more users. It is a stock that will continue benefitting from the acceleration of the digital economy and its loyal user base for years to come.

Tencent Holdings Ltd. (OTCMKTS:TCEHY)

With Tencent, you have one of the largest technology companies in China. Buying this stock is essentially buying a company with four different business segments, including social media, online gaming, digital advertising, and fintech. The social media segment of this business is impressive, as Tencent owns China’s top messaging platform called WeChat and a social network called QQ. WeChat reportedly has over 1.2 billion users while QQ has 659 million users. These platforms are extremely popular in China and Tencent generates strong revenue by selling ads across its various media channels.

In Q2, Tencent reported that its social network revenue increased by 29% year-over-year while total revenue increased by 28% over the first half of the year. There is clear evidence that the company is benefitting from the pandemic. It’s also great to see that Tencent continues to invest heavily in technological innovation. Although there are risks related to trade tensions between the U.S. and China and the potential for Chinese companies having to delist from U.S. exchanges, Tencent is still one of the best Chinese companies to own at this time.

Pinterest (NYSE:PINS)

The last social media stock that is buyable on dips is Pinterest, a company that has a strong social media platform with loyal users and big potential in the e-commerce space. It operates a “virtual discovery platform” that allows users to share things like weddings, decorating ideas, travel destinations, recipes, and more. There is a lot to like about Pinterest, as it offers online marketing services that allow brands to connect directly to consumers based on what they like.

Pinterest is worth a look for several reasons. First, you have the fact that it gapped up after its Q2 earnings report and has been holding strong since then. This is a sign of strength in a market that has been showing weakness. The stock looks ready to break out to new all-time highs any week. Another good reason to consider Pinterest is that the content on its platform is inspirational and not focused on politics and other controversial topics. That means it has less headline risk than other major social media stocks. Finally, the fact that Pinterest has very loyal users that use it for research or to make buying decisions tells us that there is a lot of potential for growth related to e-commerce and advertising as the company gets better at monetizing its platform.