As of July 2024, over 60% of the human population uses social media. This number will continue rising as global economies improve. Developing countries where social media may not be prevalent show signs of significantly growing GDP. As disposable incomes rise, this usage percent will only keep growing. The social media industry is a relatively safe bet for investors, but finding the right companies is difficult.
As someone who’s spent multiple hours scrolling reels, I can confirm the active user acquisition percentage is high, which has significantly contributed to this industry’s explosive growth. Social media isn’t affected by the high cost of capital market conditions, such as current inflation within the economy. With social media being a lower-risk investment, here are three social media stocks to buy now.
Spotify (SPOT)
Spotify (NYSE:SPOT) is a digital streaming service that provides music, podcasts and other audio content to over 600 million users worldwide. Recently, Spotify declared 2024 to be the “Year of Monetization”, emphasizing their goals of increasing profitability.
Spotify surprised analysts with an impressive Q1 2024 earnings call of $3.89 billion, exceeding expectations by $1.19 billion. Additionally, Spotify’s gross profit margin improved to 27.6% in the first quarter, with analysts projecting a continuous increase to 28.9% by the fourth quarter. This performance receives further support from the company’s subscriber surge by 14% in Q1.
Spotify’s focus on improving content quality and monetization is resulting in significant growth. Nevertheless, the company continues to innovate with new features. For instance, Spotify is beta testing a generative AI playlists feature from users’ prompts. Likewise, Spotify anticipates adding 16 million new monthly users and 6 million more premium subscribers, aiming for a total of almost 631 million users by the end of the year. Therefore, investors should consider Spotify as one of the social media stocks to buy now, especially given its strategic efforts aimed at expanding its user base and enhancing engagement.
Meta (META)
Meta (NASDAQ:META) is a global technology industry leader that owns and operates social media platforms such as Facebook, Instagram, Threads and WhatsApp, among other products and services. The company is a notable force in the modern tech world.
In the Q1 earnings call, Meta surprised with a $36.46 billion revenue, surpassing expectations by $231.89 million. Additionally, Meta has recently reached an impressive 3.24 billion daily active users across all of its platforms, demonstrating a 7% YOY increase. This highlights the company’s sustained relevance, user loyalty and continuous growth.
In 2024, Meta began heavily investing in the development of the metaverse and virtual reality, which have potential to significantly boost revenue. Meta CEO Mark Zuckerberg envisions a future where AI bots create and post content across the company’s various apps, creating novel content. Additionally, Instagram Reels continue to capture user engagement, particularly among younger demographics, boosting advertising revenue. The stock prediction for 2025 is currently $654.97, representing a potential 30.93% increase in the META stock price. Therefore, Meta’s strong financial performance and technological investments depict it as one of the social media stocks to buy now.
Pinterest (PINS)
Pinterest (NYSE:PINS) is a leading social media platform that allows users to search for ideas and inspiration visually. PINS has seen strong revenue growth for the past four fiscal years, with a key concern being profitability. However, the company is undervalued, with analysts setting an average growth estimate at $46.30, representing a growth potential of 13.59%.
Despite increasing revenue, the company still posted losses in fiscal year 2023. Profitability is sitting at 4.64%, but an operating margin of -7.35% makes it such that PINS continues to loose money. However, year-on-year revenue growth is pretty good– with PINS showing a quarterly revenue growth rate of 22.8%, representing rapid growth.
The company is investing heavily in AI at the moment, with it recently unveiling “Canvas AI” at a conference. This model is trained to enhance images that are already on Pinterest. Additionally, according to TechCrunch, Pinterest’s AI-powered collages carry more user engagement than Pins (posts on Pinterest). Higher engagement directly correlates to higher revenue, solidifying the growth trajectory the company has been on. These reasons make PINS one of the social media stocks to buy now.
On the date of publication, Matthew Rodrigues 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
