The social media stocks still don’t look overly expensive when stacked against other red-hot tech plays using artificial intelligence (AI). Undoubtedly, many social media companies stand out as potentially stealthy ways to play the AI trend. However, it’s unclear when the big payoff will be for these firms.
Despite the AI prowess of various social media firms, the technology just isn’t going to provide a profound near-term sales boost for AI chip stocks.
If looking for longer-term AI tailwinds (three to five years down the line), the best social media stocks may prove undervalued right now. Given vast amounts of data at their fingertips, it’s a mistake to discount their competitive edge as they wade further into the AI era.
Let’s explore three social media stocks that look cheap with underrated AI prospects.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is still the king of social media through its family of apps. Those include Facebook, Instagram, WhatsApp and Reels. The latter may be a “coiled spring” should U.S. regulators ultimately follow through with the ban of rival platform TikTok.
Reportedly, the appeals court will discuss the implications of a TikTok ban just weeks before the U.S. Presidential Election. Indeed, it will be a very interesting fall for America. For now, it’s impossible to tell if China-based TikTok will get banned. If it is, Meta Platforms could have yet another shot in the arm. It would continue investing heavily in AI technologies while still allocating ample time and effort on its metaverse projects.
TikTok ban or not, META stock still looks like one of the cheapest of the Magnificent Seven right now at 28.7 times trailing price-to-earnings (P/E). Investors get a founder-led company that’s not afraid to take risks to improve its odds of becoming a leader in emerging technological markets.
Pinterest (PINS)
Pinterest (NASDAQ:PINS) is getting serious about AI. With the recent unveiling of its Performance+ AI-driven advertising tool, Pinterest takes a page out of Meta Platforms’ playbook. (Meta’s ad tool, Advantage+, has been helping build value for advertisers.) The more AI innovations Pinterest shoots for, the more room PINS has to go from here as it continues its recovery from its horrid crash of 2021.
Apart from Performance+, Pinterest can benefit from AI over the long run as it beefs up the content-recommendation algorithm. And Pinterest Labs seeks to build the next generation of AI and machine learning (ML) technologies. So, it’s about time we gave the underrated image-focused social media platform the respect it deserves.
The stock may be up over 140% in the last two years. But PINS shares are still well off (around 49%) their 2021 all-time highs of over $85 per share.
Snap (SNAP)
Unlike META and PINS stock, Snap (NASDAQ:SNAP) has not been so quick to snap back from its brutal 2021-22 plunge.
After rising 23% in the past two years, the stock still remains down over 80% from its peak. It’s not hard to imagine many Snapchat users flocking over to TikTok or Meta’s Reels in recent years. Still, Snapchat has a plan to get back on the high-growth track, even in the face of stiff competition.
As the company shifts away from augmented reality (AR) and more towards AI (specifically, AI-driven ad optimization), Snap may have a means to boost its ad revenues significantly.
Furthermore, should TikTok be banned from the U.S. market, Snap may just get the windfall to get back on the high track. Until then, expect more turbulence from SNAP stock as it looks to make the most of the broad-based bounce-back in digital ads while fending off a giant in META.
On the date of publication, Joey Frenette did not hold (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.
