Sep 28, 2020 (IAM Newswire via COMTEX) -- The rise of social media over the past decade has been swift and very rewarding for early investors. As social media companies find innovative new ways to gather, use, and sell the information its users provide on a daily basis, this data has become the new currency.
Facebook /zigman2/quotes/205064656/composite FB +5.60% and Twitter /zigman2/quotes/203180645/composite TWTR +3.62% have developed into veteran social media stocks with established trading histories, but it doesn't mean other platforms are less worthy. The pandemic has brought them all both positives, such as skyrocketing engagement because of the lockdowns) as well as negatives in the form of reduced ad spending. But, each one of them is attractive in their own way.
Facebook remains the gorilla of social media stocks with a market cap of $700 billion. To give you a better idea, it is several multiples larger than Twitter, Pinterest /zigman2/quotes/211319641/composite PINS +4.63% .
, and Snap /zigman2/quotes/205087158/composite SNAP +21.03% combined. The July's ad boycott came and went, leaving Facebook almost unharmed. Giants such as Pfizer /zigman2/quotes/202877789/composite PFE +0.51% , Novartis /zigman2/quotes/203243705/composite NVS +0.85% and AbbVie /zigman2/quotes/202428675/composite ABBV +0.55% came back. But some are still on pause such as Unilever, one of the world's biggest advertisers as well as the almighty Coca Cola /zigman2/quotes/209159848/composite KO +0.97% . Did the initiative to pressure the platform to make changes against hate speech work remains to be seen as Facebook agreed to a hate speech Audis. Its progress will be closely monitored by brands.
Its sites gather over 2.7 billion monthly active users, with an average of 1.79 billion being active on a daily basis.Moreover, Facebook is not leaving growth to chance as it moving into Virtual Reality in which it gained a first-mover advantage and achieved a year-over-year increase in non-ad revenue. Grand View Research forecasted that the VR industry will expand at CAGR of 21.6% until 2027.
Therefore, Facebook is on the right growth path. Revenue increased 11% from year-ago levels in its latest quarter and quarterly earnings of $1.80 per diluted share nearly doubled to that of previous year.
Despite Facebook's power, it has not taken Twitter's place in the microblogging universe. Twitter has become a forum for all kinds of celebrities, ranging from entertainment to politics. But, Twitter is struggling for attention and with a market cap of just over $31 billion, its size remains small.
Twitter’s daily active users expanded 34% to 186 million compared to the same quarter last year but its revenue was severely hit by the pandemic. It dropped 19% compared to the same quarter last year. Twitter delivered a loss of $1.56 per diluted share for its latest quarter, as opposed to a profit of $1.43 per share one year ago.
Twitter believes that through product improvements that helped in driving user engagement higher and an overhau l of its ad server it recently completed, it could boost its engagement further and retrieve profits.
Pinterest's strength is found in loyal users and big e-commerce potential. Its virtual discovery platform is a true haven for brands to connect directly to consumers who visit the platform to create a 'collage' of products that fit their personal taste.
The picturesque platform has been holding strong since its Q2 earnings report in a market that has been showing weakness. Its greatest strength lies in its inspirational content that is not focused on politics or other controversial topics, protecting it against headline risk that other social media stocks are highly exposed to. Moreover, its loyal userbase that use the platform for research or to make buying decisions implies a lot of growth potential both in e-commerce and advertising. All an investor has to do is be patient until the company gets better at monetizing its platform.
This is perhaps one of the most underrated social media stock. Its Snapchat users are extremely loyal as the userbase counts 238 average million Daily Active Users that create 4 billion snaps on a daily basis. Their engagement was confirmed in the second quarter, as they opened the app 30 times a day. Its Q2 results contained some impressive figures with 17% year-over-year increase in revenue and the number of daily active users. Although, these achievements didn't find their way to the bottom line as Snapchat reported a loss, the company invested in growth and cashflow did improve. But, its greatest appeal lies in the younger demographic, allowing brands to directly access Generation Z. Like Facebook, it is investing on augmented reality and is launching new features.
Tencent Holdings Ltd's /zigman2/quotes/207908563/composite TCEHY -4.68% offers an investor with an exposure to four different business segments: social media, online gaming, digital advertising, and fintech, all of which continued to thrive throughout the pandemic. Its social media segment is impressive, with China's top messaging platform WeChat and a social network QQ. WeChat reportedly has over 1.2 billion users while QQ has 659 million users. Both platforms are extremely popular in China, allowing Tencent to generate strong revenue through ads as its social network revenue increased 29% year-over-year during Q2. The only downside is related to trade tensions between the U.S. and China, as it could potentially be delisted from U.S. exchanges.
With so many aspects of our lives shifting online, it makes sense that social media stocks appeal to investors, especially when their business model benefits from online advertising and e-commerce. However, 2020 has altered consumer behavior and brought increased social awareness. There is also the regulatory pressure to think about. For now, Facebook turned out to be the most immune to external shocks as it maintained its dominance, while expanding its business lines.
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