If you have a child in high school, they likely will not know a world that didn’t include social media. And for better or worse, social media is here to stay. That’s because these companies have developed ways to keep their users engaged. And engagement is the keyword.
For the most part, social media companies generate money through ad revenue. Simply put, the more active (i.e. engaged) users they have, the more revenue they generate.
Higher revenue leads to earnings growth. And earnings growth is always a harbinger of a higher stock price. That’s why it’s important for investors to pay attention to this sector even if they’re not active users of social media themselves.
For the purposes of this presentation, we’re not including Facebook (NASDAQ:FB). The company is well known as the leading social media stock. However, the company’s recent troubles are also well documented. And as of this writing, FB stock remains under pressure. It may, and likely will become a buy and perhaps at a better valuation. But for now, Facebook doesn’t get a like.
But if you’re interested in which social media stocks may be good buys, we’re happy to give you “7 Social Media Stocks That Are Worth Your Attention”
Quick Links
- Alphabet
- Microsoft
- Twitter
- Snap
- Pinterest
- Spotify
- Angi Inc
#1 - Alphabet (NASDAQ:GOOG)
Alphabet (NASDAQ:GOOG) is the parent company of Google. And when you purchase shares of GOOG stock, you’re buying much more than a social media company. However, in the category of wise purchases, you can put Google’s $1.6 billion purchase of YouTube in 2006 near the top of the list.
YouTube was one of the original social media platforms and home to the “How To” videos that became ubiquitous as the digital generation came of age. Today, YouTube is the second most visited site in the world. However, it’s become a stand-alone entertainment platform in its own rite. In fact, the company has a partnership with the National Football League with its YouTube TV network.
According to analysts, GOOG stock still has about a 10% upside from its current level. As one of the only companies with a market cap of over $1 trillion, your investment is going to cost a pretty penny. But, it also looks like one of the safest investments you can make. And for those that put weight on such things, GOOG stock is a favorite of ARK’s Cathie Wood who earlier this year placed it on her list of the 10 best stocks to buy and hold for 5 years.
About Alphabet
Alphabet Inc offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Read More - Current Price
- $192.96
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $200.56 (3.9% Upside)
#2 - Microsoft (NASDAQ:MSFT)
The next social media stock on this list stays in the tech sector. Although not lumped in with the FAANG stocks, Microsoft (NASDAQ:MSFT) has been one of the strongest performers in the sector since the onset of the pandemic. This is why, like Alphabet, you’re buying more than a social media stock when you purchase MSFT stock.
However, in terms of social media stocks, Microsoft brings its LinkedIn property to the party. And even though Microsoft paid significantly more for LinkedIn than Alphabet did 10 years after the latter purchased YouTube ($26.2 billion versus $1.6 billion), it still has paid off handsomely for Microsoft. One reason for that is that LinkedIn offers a premium membership (LinkedIn Premium) which means it is not solely reliant on advertising revenue.
In 2020, LinkedIn generated $8 billion in revenue for Microsoft. And as the economy begins to reopen, demand for qualified workers will remain at elevated levels for some time. That should contribute to significant activity and revenue growth on the platform.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $436.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 26 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $508.46 (16.5% Upside)
#3 - Twitter (NYSE:TWTR)
Next on our list of social media stocks that are worth your attention is Twitter (NYSE:TWTR). I can see your eyes rolling right now. How can I keep Facebook off this list, but put Twitter on? My answer is that Twitter is making an effort to police itself.
Twitter is widely thought of as the wild west of social media platforms. But the company has added features that are attempting to according to the head of product Kayvon Beykpour, “build health more natively into the product.”
Will any of these features prevent Twitter from being Twitter? My experience with it suggests otherwise, but I respect the fact that they’re trying something. It’s also the kind of action that elected officials would want to see should the company be asked to testify in front of Congress.
TWTR stock has been trading in a tight range since mid-August. However, analysts give the stock a 16% increase from its present price.
About Twitter
Twitter, Inc operates as a platform for public self-expression and conversation in real-time. The company's primary product is Twitter, a platform that allows users to consume, create, distribute, and discover content. It also provides promoted products that enable advertisers to promote brands, products, and services, as well as enable advertisers to target an audience based on various factors, including who an account follows and actions taken on its platform, such as Tweets created and engagement with Tweets.
Read More - Current Price
- $53.70
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Snap (NYSE:SNAP)
I would put Snap (NYSE:SNAP) on this list even if it wasn’t up nearly 50% in 2021. That’s because I have kids and they use Snap. “Snaps” replace texts and Snapchats are their version of Slack.
The company’s valuation has been a source of concern for many years. It’s not revenue that’s the problem; it’s earnings. However, Snap posted positive earnings of 10 cents a share in the last quarter. In terms of profit, that was the best number the company had ever posted. But it was also the third time in seven quarters that the social media company posted positive earnings.
SNAP stock is bumping up against the consensus price target of analysts. And with the stock up over 50% in 2021, it’s logical to think the rally may be long in the tooth. But an earnings report coming later in October may provide a catalyst that could allow SNAP stock to test the record high of $83.34 it set in late September.
About Snap
Snap Inc operates as a technology company in North America, Europe, and internationally. The company offers Snapchat, a visual messaging application with various tabs, such as camera, visual messaging, snap map, stories, and spotlight that enable people to communicate visually through short videos and images.
Read More - Current Price
- $11.40
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 22 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $37.10 (225.4% Upside)
#5 - Pinterest (NYSE:PINS)
The next social media stock on our list is Pinterest (NYSE:PINS). This may surprise some investors since PINS stock is down 22% in 2021. I’m not sure I understand why. The consensus opinion of analysts is that Pinterest stock has a 44% upside over the next 12 months. And as I look at the stock chart since October began, it looks like the rally may be underway.
When looking at Snap, I pointed out how I liked SNAP stock because of the attention Snap gets from the younger generation. I feel the same way about Pinterest. If I ask my daughters for a suggestion about anything, my phone explodes with links from their Pinterest account. While this isn’t a true fundamental analysis, it tells me that the platform has high engagement. And when you factor in that Pinterest has registered a profit in each of the last four quarters, there are many reasons to like the stock.
About Pinterest
Pinterest, Inc operates as a visual search and discovery platform in the United States and internationally. Its platform allows people to find ideas, such as recipes, home and style inspiration, and others; and to search, save, and shop the ideas. The company was formerly known as Cold Brew Labs Inc and changed its name to Pinterest, Inc in April 2012.
Read More - Current Price
- $29.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 20 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $41.46 (40.6% Upside)
#6 - Spotify (NYSE:SPOT)
Spotify (NYSE:SPOT) may not be top of mind as a social media platform. However, the streaming music platform does provide a platform for artists to personalize their profiles and it has a community aspect where listeners can see what their followers are listening to. At the end of the last quarter, the company had 165 million subscribers.
Like LinkedIn, Spotify doesn’t solely rely on ad revenue. The company's premium service, Spotify Premium, is a popular option that offers listeners a compelling offer of ad-free music. The company’s recent pivot into podcasts is moving the company into an area of the streaming audio sector that is showing no signs of being oversaturated.
Like Pinterest, SPOT stock is down for the year. In this case by 20%. However, the consensus opinion of analysts suggests that Spotify can recover most of this gain in the next 12 months. I wouldn’t say that Spotify has a low valuation. However, with a market cap of just below $45 billion it puts the company’s price-to-sales ratio at 4.4.
About Spotify Technology
Spotify Technology SA, together with its subsidiaries, provides audio streaming subscription services worldwide. It operates through two segments, Premium and Ad-Supported. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers.
Read More - Current Price
- $460.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 22 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $429.96 (6.7% Downside)
#7 - Angi Inc (NASDAQ:ANGI)
The last of the social media stocks on this list is Angi (NASDAQ:ANGI). This is the company known for Angi Homeservices which it offers through its website Angi.com (formerly known as Angie’s List). This is the world’s largest digital marketplace for home services.
ANGI is the closest thing to a meme stock on this list. And sure enough in September, the stock was caught up in a bit of a short squeeze that accounted for some of the stock’s 16% gain. Short interest still is around 11%. However, the e-commerce company is beginning to deliver higher year-over-year revenue as it begins to report in months that are overlapping the pandemic. One reason for that is that the marketplace side of the business is heavily dependent on interpersonal contact. Many of those services were curtailed during the pandemic, but have been coming back. Analysts give the stock a 17% upside. And if the company delivers a strong earnings report that number could go much higher.
About Angi
Angi Inc connects home service professionals with consumers in the United States and internationally. The company operates through three segments: Ads and Leads, Services, and International. It provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals, matches consumers with independently established home services professionals.
Read More - Current Price
- $1.67
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $3.11 (86.1% Upside)
The same technology that enabled social media (i.e. the smartphone) may be the same technology that forces these companies to rethink their business model. If that’s the case then social media may look very different in the next few years, and that may be a change for the better.
But for all the real concerns about privacy and censorship, there’s no denying that it can be a positive force. For example, small businesses now routinely use social media as a dramatically more cost-effective way to communicate with customers. It can, and does, allow friends and family to stay in touch particularly over long distances. And rightly or wrongly, it is the way many individuals receive and consume the news.
As an investor, investing in social media stocks could be a lot like investing in cannabis stocks or other sin stocks. You may not like them. You may not use them. But there’s no denying that there’s money to be made as advertisers pay these companies handsomely to reach their audiences.
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