Social networks have changed how we interact with the world and consume information. It’s easier to see what people are up to when they regularly post about their lives on these platforms. Many businesses have noticed the soaring amount of hours people spend on social media each day. Companies have created accounts on many of these platforms and pour money into ad placements. This dynamic has been a boom for social media stocks.

Some companies that operate in the industry generate billions of dollars in revenue every single month. A portion of those same corporations have rising profits that make them look compelling for long-term investors. Chances are you spend a lot of time on at least one social network. That’s a good thing for investors who capitalize on the opportunity.

Are you wondering which social media stocks have the most potential? These three companies are growing their user bases while boosting profits.

Meta Platforms (META)

Meta Platforms (NASDAQ:META) is the parent company of Facebook, Instagram, and WhatsApp. The company has been a leader in the social media industry since Facebook’s debut in 2004. 

Meta Platforms has been a delight for early investors, and it’s still growing at a fast pace. Revenue has increased by 27% year-over-year in the first quarter while net income has soared by 117% YOY. The company has committed to cutting costs while achieving solid financial results. Reflecting this focus, Meta Platforms’ headcount is down by 10% YOY.

The company initiated its dividend program at the end of 2023 and looks like it will maintain a high dividend growth rate for several years. The dividend isn’t the only thing that should excite investors. Meta Platforms only trades at a 28 P/E ratio and has delivered a 41% year-to-date gain. Shares of the social media giant are up by 144% over the past five years.

Alphabet (GOOG, GOOGL)

Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is another winner in the social media industry thanks to YouTube. The leading video platform regularly attracts billions of monthly viewers. The stickiness of YouTube, Google search, and Alphabet’s other digital properties have translated into impressive long-term gains. Shares are up by 31% YTD and have roughly tripled over the past five years.

The online advertising leader only trades at a 28.5 P/E ratio while offering a 0.44% yield. Like Meta Platforms, Alphabet is in a good position to meaningfully raise its dividend for several years. The firm’s financial growth certainly adds strength to this theory. Alphabet reported 15% YOY revenue growth and 57% YOY net income growth in the first quarter. YouTube is a key contributor that generated $8.1 billion in ad revenue. That’s a 20.9% YOY increase.  

Wall Street analysts believe that the tech giant has more room to run. It’s rated as a strong buy and has an average price target that implies an 11% upside from current levels.

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) is one of the top social media stocks that has delivered steady returns for long-term investors. The stock has gained 20% YTD and has more than tripled over the past five years. 

The company has many business segments. Microsoft Cloud is the largest component and generated more than half of the company’s total revenue in Q3 FY24. The firm also has exposure to gaming, artificial intelligence, business software, and advertising.

While it may be hard to keep track of which companies Microsoft owns, it happens to be LinkedIn’s parent company. LinkedIn has over one billion users and delivered 10% YOY revenue growth. The social network is within Microsoft’s “Productivity and Business Processes” segment which was up by 12% YOY.

The stock has received plenty of high price targets from Wall Street analysts. The average price target implies a 13% gain from current levels. The highest price target of $600 per share suggests that a 34% upside is possible.

On this date of publication, Marc Guberti held long positions in MSFT and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.