Is Facebook Still the Choice Pick Among Teen Stocks?

Although other social media platforms resonate with teens, all roads eventually lead to Facebook

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In social media, the biggest winner hands-down among teen stocks is Snap Inc (NYSE:SNAP). It’s not a point worth arguing. Although Facebook, Inc. (NASDAQ:FB) is the undisputed king of social media, it caters to every other demographic besides the super-young. Even with the company owning Instagram, Snap simply resonates better with youth.

Recent statistics give you all the information you need to know. Out of total Snapchat users, 60% are under 25 years old. In the U.S., 78% of people aged 18 to 24 years use the platform. You’ll find similar statistics in the U.K., where 77% are under 25.

Especially problematic for Facebook is that 47% of American teenagers believe Snapchat is the superior platform. To add insult to injury, 24% prefer Snapchat over Instagram. For most investors, that’s all they need to hear to strike FB from their list of teen stocks to buy.

Even worse, the trend isn’t likely to improve for Mark Zuckerberg and company. The teens and tweens who still use Facebook are logging in at a significantly lower rate. Not only that, they’re less engaged than ever before. On the flipside, Snapchat attracts teen-user engagement like flies to, well, whatever flies are attracted to.

Signs exist that older children who are transitioning to tweens largely ignore Facebook. Thus, when they transition again to legitimate teens, they’ll likely use Snapchat. Again, that would challenge the idea that FB is a viable play among teen stocks.

But, at the same time, I think we have to be careful with how we define our terms. Facebook may be losing the young demographic war, but they’re winning where it matters: the markets. Despite several controversies, FB is up 8% year to date. Meanwhile, SNAP is struggling, down more than 22%.

Teen Stocks Are Rolling Targets

One of the peculiar trends that I’ve noticed in media coverage of millennials is that some apparently fail to recognize that demographics are rolling targets. Recently, I heard a social-media blogger blast millennials for being self-absorbed.

It’s a common and, I would say, fair criticism. But the problem was that the blogger referenced today’s college-aged kids. Those aren’t millennials; they’re Generation Z. Like I said, demographics are rolling targets.

This is important to remember because as the teen demo “rolls up” and matures, so too do their preferences and priorities. What was trendy and cool back in your teenage years just doesn’t apply when you’re in your 20s. And don’t get me started about your 30s — unless you’re this guy.

Among teen stocks, I believe Facebook has an overlooked advantage. Yes, Snapchat is eating its lunch with the young demo. But this population segment doesn’t make any money. When people get older and become more established, they invariably choose Facebook.

In the lucrative 25- to 34-year-old age group, Facebook beats everyone. However, it also maintains a dominant position from ages 35 to 64. Even among those 65 and older, FB demonstrates very respectable engagement.

Facebook has a clean interface that’s attractive, but not in a gaudy, pandering way that Snapchat is. When you look at the latter platform, it’s obvious who they’re trying to attract. But because Facebook doesn’t have an aesthetically-slanted interface, it appeals to a wider audience.

Put another way, FB is literally an investment with which you can grow old. If Snapchat is the high-school flame, then Facebook is the loyal spouse. Sure, young love is fun and spontaneous, but true love is stable and reliable.

Facebook Consistently Proves Its Worth

Although it’s not something that teenagers use, what makes FB one of the best teen stocks is that, eventually, they’ll come to love it. Although I don’t necessarily want to say that Snapchat is a flash in the pan, it sure looks that way. We can all agree, though, that it has much to prove.

Facebook, on the other hand, doesn’t need to prove anything, yet it still does. For example, several celebrities and well-known personalities blasted the company for the Cambridge Analytica debacle. Many logged onto Twitter Inc (NYSE:TWTR) account, spreading one simple message: #DeleteFacebook.

At one point, FB stock was down more than 14% YTD.

But since hitting rock bottom, shares have jumped 26%. This momentum plainly demonstrates that even with fierce political backlash, Facebook finds a way out of trouble. Critics lament how quickly the company recovered, but it’s easy to see why.

The reality is that Facebook is too valuable and too dominant. Despite over two billion active users, the company grows its base as if it were a start-up. It casts the widest net possible, and so it doesn’t mind that it loses the young demo. Inevitably, they’ll come around.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/06/facebook-still-choice-pick-among-teen-stocks/.

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