For the past decade, numerous social media platforms have become a vital part of our daily lives. Further, analysts expect social media stocks to remain a high-growth area for the foreseeable future. For instance, Statista forecasts social media users worldwide to increase from around 3.6 billion people in 2020 to close to 4.5 billion by 2025.
Investing in social media has almost doubled shareholder dollars over the past three years. Despite declining 13% year-to-date (YTD), the Global X Social Media ETF is up about 90% in that three-year period.
The largest social media stocks continue to generate most of their growth from advertising. Social media ad spending stood at roughly $132 billion in 2020. Now, it’s forecast to surpass $200 billion by 2024. However, the industry is evolving to create revenue from other sources as well, including e-commerce, digital payments, video games and (more recently) the metaverse.
With substantial money flowing to the industry, 2022 could be an opportune time to consider investing in social media stocks. So, that information in mind, here are seven picks to add to long-term portfolios:
- Bumble (NASDAQ:BMBL)
- Global X Social Media ETF (NASDAQ:SOCL)
- Match (NASDAQ:MTCH)
- Meta Platforms (NASDAQ:FB)
- Pinterest (NYSE:PINS)
- Twitter (NYSE:TWTR)
- Zynga (NASDAQ:ZNGA)
Social Media Stocks: Bumble (BMBL)
52-week range: $30.10 – $84.80
Based in Austin, Texas, Bumble offers online dating services through both Bumble and Badoo. It was founded by CEO Whitney Wolfe Herd, a former executive at Tinder, another dating app owned by Match.
Bumble announced third-quarter results on Nov. 10. For the period, revenue grew 24% year-over-year (YOY) to $201 million. Net loss narrowed to $10.7 million, down from $22.8 million in the prior-year period. Finally, cash and equivalents ended the quarter at $292 million. On the results, Herd remarked the following:
“In the third quarter, we delivered strong revenue growth and successful execution across our strategic priorities including driving user engagement, expanding into new markets, launching innovative product and safety features, and improving our overall monetization.”
Bumble and Badoo both generate revenue from in-app purchases and premium subscriptions. The Bumble app specifically delivered solid growth with revenue of $142 million, up 39% YOY.
What’s more, management has recently announced plans to enter the hot metaverse market with Bumble BFF. The platform allows users to create virtual communities and discover platonic friends rather than dates.
Right now, BMBL stock hovers around $33, down over 37% in the past one month. Investors might consider the recent dip as an opportunity to buy Bumble shares, however, currently trading at 7.38 times trailing sales according to Yahoo! Finance. Analysts give this pick of the social media stocks a 12-month median target of $57.
Global X Social Media ETF (SOCL)
52-week range: $52.89 – $79
Expense ratio: 0.65% per year
Our next discussion on this list of social media stocks actually revolves around an exchange-traded fund (ETF). The Global X Social Media ETF provides exposure to social media companies from across the world. The fund started trading back in November 2011. Its net assets currently stand close to $344 million.
SOCL has 44 holdings and tracks the returns of the Solactive Social Media Total Return Index. In terms of sectoral breakdown, Communication Services account for more than 90% of the fund, followed by Information Technology (IT). Further, more than 43% of its companies come from the United States, followed by China (30%), South Korea (10.5%), Luxembourg (5.1%) and the Netherlands (5%).
This ETF’s top ten stocks account for around 65% of total assets. In other words, SOCL is a top-heavy fund. Meta Platforms has the largest slice with roughly 11%. Other leading names in the roster include Tencent (OTCMKTS:TCEHY), Snap (NYSE:SNAP), NetEase (NASDAQ:NTES), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and South Korea-based Kakao.
As I noted before, Statista estimates that social media ad spending will surpass $200 billion by 2024. Therefore, many of these names in the fund could also see revenues increase significantly.
SOCL is down so far this year. But given the high-growth prospects of the space, interested investors could regard the fund’s depressed valuation as a buying opportunity.
Social Media Stocks: Match (MTCH)
52-week range: $127.42 – $182.00
Next up on this list of social media stocks, Dallas, Texas-based Match operates the largest portfolio of online dating platforms worldwide. Its popular dating apps include Tinder, Hinge, Match.com, OkCupid and PlentyOfFish.
Match released Q3 results in early November. For the period, revenue grew 25% YOY to $802 million. Further, net income came in at $131.2 million, or 43 cents per diluted share. That’s compared to $141.2 million, or 47 cents per diluted share, in the prior-year quarter. Finally, cash and equivalents ended the quarter at $511 million. On the announcement, CEO Shar Dubey remarked the following:
“We took our place among some of the leading listed companies in the United States as Match Group was added to the Standard and Poor’s 500 Index this quarter.”
Recently, management revealed plans to create a dating metaverse called Single Town, where members can move around freely and interact with others via avatars. Match is collaborating with Hyperconnect, a social discovery and video technology company it acquired this year, to develop the project.
MTCH stock hit a 52-week low in recent days and now hovers around $125, down nearly 17% YTD. Shares are trading at 54.58 times forward earnings and 12.08 times trailing sales, according to Seeking Alpha. The 12-month median target for MTCH stock stands at $177 per share.
Meta Platforms (FB)
52-week range: $244.61 – $384.33
Next up on this list of social media stocks, California-based Meta Platforms — formerly known as Facebook — is the largest online social network worldwide, with more than 2.8 billion monthly active users (MAUs). Its ecosystem of platforms primarily consists of Facebook, Instagram, Messenger and WhatsApp.
This social media giant announced Q3 results back in late October. For the quarter, revenue increased 35% YOY to $29 billion. The company generated net income of $9.2 billion, or $3.22 per diluted share, up from $7.9 billion, or $2.71 per diluted share, in the prior-year period. Cash and equivalents ended the period at $58 billion.
CEO Mark Zuckerberg aims to gain a head start in the metaverse, which the company regards as a successor to the Internet. Zuckerberg remarked, “I’m excited about our roadmap, especially around creators, commerce, and helping to build the metaverse.”
Meta Platforms is en route to offering virtual reality (VR) headsets and related devices designed by Facebook Reality Labs. The company has recently launched Horizon Workrooms as well, allowing users to participate in virtual meetings through digital avatars. In Q3, Instagram Reels also became a key growth driver worldwide. Now management anticipates fourth-quarter total revenue to come in between $31.5 billion and $34 billion.
FB stock recently came under pressure after a whistleblower report. Shares are above $310 territory right now, up 15% YTD. They trade at 22 times forward earnings and 7.75 times trailing sales. Currently, the 12-month median target for this pick stands at $410.
Social Media Stocks: Pinterest (PINS)
52-week range: $34.57 – $89.90
With over 440 million monthly users worldwide, this next pick of the social media stocks has become a leading site for merchants and creators to advertise their products and show off their ideas.
Pinterest released Q3 results back in early November. For the period, total revenue grew 43% YOY to $633 million. Furthermore, non-GAAP net income stood at $191 million, or 28 cents per diluted share, up from $87 million in the prior-year quarter. Finally, cash and equivalents at the end of the period stood at $1.2 billion. On the results, CEO Ben Silbermann remarked the following:
“I am proud of the team’s progress in launching a number of new products for both creators and brands, bringing more video content and shoppable features to Pinterest.”
With the end of lockdowns, Pinterest is struggling to preserve monthly activity on the platform. As a result, management has been spending heavily to maintain its user base. Meanwhile, the company recently launched TwoTwenty, an “in-house incubator” that could help the company innovate and carry new ideas to the market more rapidly.
In early November, the news that PayPal (NASDAQ:PYPL) will not acquire Pinterest led to a selloff in PINS stock, which hovers around $37 today. This pick is down about 44% YTD. PINS is trading at about 33 times forward earnings and 9.3 times trailing sales. The 12-month median target for the stock stands at $55.
52-week range: $41.01 – $80.75
Social media platform Twitter has recently been in the news. Why? Because its founder, Jack Dorsey, has stepped down as CEO. Dorsey has been replaced by Parag Agrawal, who is expected to increase the focus on cryptos like Bitcoin (CCC:BTC-USD).
Twitter released Q3 results back in late October. Revenue increased 37% YOY to $1.28 billion. However, the daily active user count fell short of market estimates. What’s more, the net loss came in at $537 million, or a loss of 67 cents per diluted share, compared to net income of $29 million, or 4 cents per diluted share, in the prior-year quarter. Finally, cash and equivalents ended the period at $3.5 billion. After the announcement, now former CEO Jack Dorsey remarked:
“We’re improving personalization, facilitating conversation, delivering relevant news, and finding new ways to help people get paid on Twitter.”
This social media company is working to apply machine learning and artificial intelligence (AI) to most aspects of operations. On another note, it recently launched a partnership with S&P Global (NYSE:SPGI) to collect sentiment data for stocks that comprise the S&P 500. The new Twitter Sentiment Index “is designed to reflect the performance of the 200 constituents of the S&P 500 with the most positive sentiment on Twitter.”
TWTR stock plunged after the announcement of Q3 results. Now, shares hover at $44, down roughly 19% YTD and around 45% from its February peak. This pick of the social media stocks trades at around 33 times forward earnings and 6.98 times trailing sales. The 12-month median target for the stock is $65.
Social Media Stocks: Zynga (ZNGA)
52-week range: $5.57 – $12.32
Last up on this list of social media stocks, San Francisco-based Zynga develops games played on mobile platforms and social networking sites. With a growing user base in over 175 countries, the company is now focused on offering more live-gaming experiences.
Zynga issued Q3 results on Nov. 8 and reported record revenue of $705 million, up 40% YOY. What’s more, its net loss narrowed 66% YOY to $42 million, or 4 cents per diluted share, an improvement from the loss of $122.2 million in the prior-year period. Lastly, cash and equivalents ended the quarter with roughly $1.3 billion. On the metrics, CEO Frank Gibeau remarked the following:
“We delivered strong quarterly results ahead of guidance, including record Q3 revenue and bookings primarily driven by another standout quarter from Rollic’s hyper-casual portfolio.”
In early October, the company announced its acquisition of StarLark — a mobile game developer based in China — and its hit game Golf Rival. The company also recently purchased Chartboost, an advertising platform with 700 million monthly users, to expand ad sales. Zynga currently generates around one-fifth of its revenue from advertising.
ZNGA stock hovers at roughly $6 per share today, less than half of its peak in February. Shares are down 38% YTD and trade at a cheap valuation of 18 times forward earnings and 2.44 times trailing sales. The 12-month median target for the stock is $10.50.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.