With Pinterest achieving some significant growth in recent years, many investors are now looking for other potential social media growth stocks.
Investing in social media companies has been a turbulent affair over the years for many investors. While there is a lot of growth potential that exists, the profitability question often looms large. Pinterest (NYSE: PINS) is one of the leading examples of a social media growth stock, having carved out some impressive gains. Here are some similar growth opportunities in the social media space:
Following its IPO in March 2017, Snap Inc (NYSE: SNAP) had a tough time of things for many years. The lack of progress at the company and the actions of its competitors led to people becoming pessimistic about Snapchat’s future.
The price bottomed out at about $5 in December 2018 after initially opening at $27 when it went public. Since that low point, the share price has been growing steadily, barring the overall market dip seen in March when the COVID-19 pandemic struck.
It quickly saw a rebound and following its earnings release for Q3 2020, the price rose by 37%. This was on the back of results that were a lot better than expected. Revenue for the quarter was $678 million, a year-on-year rise of 52%, significantly better than the forecasted $550 million. Daily active users hit 249 million, six million more than predicted.
The company also recently announced a new Spotlight feature that aims to compete with the likes of TikTok and Instagram Reels, with the share price hitting record highs after this news.
With robust advertising demand during the pandemic and many media companies seeing a lot of success from offering shows on Snapchat, there is plenty to be optimistic about. The financial outlook for 2021 looks strong and as a result, it is definitely a potential growth stock despite recently hitting all-time highs.
Twitter’s (NYSE: TWTR) disappointing user growth in the third quarter led to a 21% share price drop after the Q3 financial results announcement. The company did manage to beat the revenue and profit expectations of analysts for the quarter. Twitter’s Q3 revenue was $936.2 million, compared to the expected $777.2 million.
During the second quarter, there were 20 million new users for Twitter as the COVID-19 pandemic was in full swing. Analysts were expecting a further addition of 10 million users in the third quarter, but this only turned out to be one million extra users. Despite the lack of user growth, this didn’t really hurt Twitter in a financial sense.
There definitely seems to be some growth potential going forward for Twitter. The fourth-quarter figures will be key, with the U.S. Presidential election and the holiday season being two major events for the platform. With likely increasing ad spend during the holiday season and efforts to attract new users, Twitter could be poised for some nice growth.
Okay, Facebook (NASDAQ: FB) can no longer be considered as a growth stock. However, there is certainly great growth potential on the table. Since its shares declined at the start of the pandemic, the company’s share price has regularly hit new highs.
Facebook’s third-quarter revenue rose 22% year-on-year to $21.5 billion. This was mainly driven by the 22% increase in ad sales, with operating income increasing 12% to $8 billion. Its daily and monthly active users also grew by 12% year-on-year. After these financial results were announced, Facebook shares fell 6.3%.
Facebook has outlined concerns that the shift over to digital advertising and online shopping might not last in 2021 as physical businesses get back up and running. There are also worries about potential new regulations that might curtail Facebook’s operations, as well as ongoing privacy lawsuits.
However, it is still one of the most popular online advertising networks in the world and it only looks like getting bigger as more and more businesses focus their attention online. At the right price, Facebook is definitely a worthwhile investment.
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