In the world of social media, demographics are key as they largely help advertisers determine where best to market their products. The younger millennials, age 25 and younger, have become the new sweet spot since everyone wants to target the group that is starting to increase its disposable income.
Because this age breakdown is important to advertisers, it has also become important to investors. And based on its most recent earnings release and a new research report from eMarketer, Snap Inc (NYSE:SNAP), the parent company of popular app Snapchat, is attracting a lot of attention.
The research firm has predicted that Snapchat will add 1.9 million new users under the age of 25 this year while its biggest rival, Instagram, will add 1.6 million. The latter, which is owned by Facebook Inc (NASDAQ:FB), originally started out as a place to post and share pictures, but it has since adapted similar features to Snapchat and has grown its user base as a result.
Most investors wrote SNAP off for dead last year after it fell dramatically following its IPO, but now that buyers are stepping back in, it appears as though the rivalry between these two social media companies is heating up again.
FB Stock Is the Clear Winner
Facebook’s namesake website has lost some of its “cool” with the younger crowd — as evidenced by the fact that I still use it from time to time — and the numbers regarding Instagram are a bit concerning. That said, if I had to choose between FB and SNAP in terms of investment potential, there really is no competition.
The amount of data that FB has mined over the years is priceless, and I also like that its management team is better positioned to adapt their business model to recapture the attention of the younger demographic. Plus, the current technicals suggest plenty of upside ahead.
FB has taken a hit on the combination of Snapchat’s expected growth and the market correction, and since rallying to a new all-time high on the back of earnings earlier this month, the shares have lost about 10% of their value. However, this weakness has created a buying opportunity.
FB has major price support at $170 (the black line), and its 200-day moving average (the blue line) isn’t far below that. It has already started to bounce off that level, and over time I see it reaching prices above $200 — the kind of upside that SNAP just can’t offer right now.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.