Investing in social media stocks might seem like a no-brainer. The social media market size was $219.06 billion in 2023, and by the end of 2028, it is expected to almost double. It reveals that the social media market has a compound annual growth rate (CAGR) of 13.2% during that period. So, it only makes sense to invest in social media stocks right now in hopes of high returns in the future, right? Well, the reality is much more nuanced than that.
Because social media is a rapidly growing market, investors must be ready to adapt to the newest changes and leaders. This means that current top players might not be leaders only a few years from now, considering how fast people want changes to be made in social media. Many of the existing social media platforms are overhyped and indicate no signs of surviving fierce competition. Below are the three social media stocks to sell this month before they crash and burn.
Trump Media & Technology Group (DJT)
Fundamentally, any business with a person’s name attached to it carries a premium risk. The company might prosper when the public likes the figure, but if it is in the spotlight of criticism, it has a spillover effect on the firm and hurts the business. This is especially true if the figure tends to be political or controversial.
Trump Media & Technology Group (NASDAQ:DJT) is just that, but there are more nuanced reasons why investors should sell the stock. First, former president Trump is starting to utilize other social media platforms again. Earlier this week, the former president returned to X for the first time in a year and shared multiple posts promoting his campaign. Furthermore, the platform is simply too small compared to its competitors, and its growth potential is limited to people who align with Mr.Trump’s political views.
Without being political, investing in Trump Media & Technology Group is too dependent on the former president himself and the upcoming presidential election results, which is why I have it as a sell.
Match Group (MTCH)
The following stock on this list is Match Group (NASDAQ:MTCH), the owner of major dating apps like Tinder, Match.com, Hinge and many more. These dating apps have dominated the online dating platform market for years, and the upside for MTCH is not great. Other competitors in the market, like Hinge and dating apps that target a specific group like Grindr, are already starting to take over MTCH’s market share.
On top of consumer’s changing preferences, data shows that Americans are spending less on subscriptions for the app’s premium features. Last month, the Match Group announced that it plans to lay off 6% of its current employees due to slower growth and declining subscription users. Match Group is struggling amid rising competition, and while Tinder is the largest dating app player in the market right now, we do not know how long that will stay true.
Rumble (RMBL)
Rumble (NASDAQ:RMBL) is another social media investors should be skeptical about. It advertises and prides itself on being the free-speech alternative to YouTube, where users can more freely post, share and watch videos without strict censorship.
The first major problem with Rumble concerns monthly active users (MAUs). While the number did increase from 50 million in the first quarter to 53 million in the second quarter, it is still largely short of 67 million MAUs just two quarters ago.
In addition to a sharp decline in MAUs, another problem is the geographical distribution of its users. Out of the 53 million MAUs, almost 70% of them were from the U.S. and Canada, and this has been a consistent pattern even when the numbers were high. This could signal a potential problem as Rumble can only attract users from certain geographical locations, which limits its growth potential. This is largely because other Western governments like Australia, Brazil, France and New Zealand want to censor Rumble’s content, indicating that Rumble won’t be able to attract international users for a while.
On the date of publication, Andy Kim 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
