Company / Analytics

Analytics, 28 April 2022

Best social media stocks to buy

Social media is an increasingly fast-growing industry, though it’s not new anymore. About 4 billion people – more than half the global population – are active social media users. The number of users is expected to reach 4.4 billion by 2025.

The largest social media companies make most of their money from advertising and e-commerce, but digital payments and video games are increasingly becoming revenue streams for these companies. Investing in social media has more than doubled shareholder dollars since 2018, driven by top names such as Meta (Facebook), Snap, Twitter, and Alphabet (Google).

Outside these big players, here are less known but leading social media companies worth considering for your portfolio.

Best Social Media stocks to buy

1. Match Group

Have you ever heard of Tinder? If you have, then you should know Match Group. Match Group is the parent company of Tinder – by far the most downloaded dating app worldwide. The company also owns OkCupid, and Hinge – other popularly known dating sites.

Finding a relationship online has been normalized over time, though COVID-19 helped solidify the demand for online dating services. Match grew steadily even at the height of the 2020 pandemic lockdowns.

Match Group has been producing double-digit revenue growth for years. Compared to other large social media businesses, Match has a unique business model. The firm derives most of its revenue from subscriptions paid directly by users rather than advertising. As online dating becomes more common, Match continues to forecast strong growth in revenue. In 2021, the company completed the acquisition of South Korea-based social and video platform Hyperconnect for $1.725 billion.

Match Group will report its earnings on Tuesday, May 3rd. The company expects first-quarter 2022 revenues between $790 million and $800 million, indicating year-over-year growth of 18-20%. Analysts expect the company to post earnings of $0.57 per share for the quarter. On average, analysts expect Match Group to post $3 EPS for the current fiscal year and $3 EPS for the next fiscal year.

2. Etsy

Best known as an e-commerce platform, Etsy stands out for its unique approach to facilitating online sales. In addition to specialising in vintage and handmade goods, Etsy is also an online discovery platform where shoppers directly connect with creators. Etsy has more than 7.5 million sellers and 96 million active buyers, positioning it as one of the largest e-commerce platforms with a social focus.

Etsy will report quarterly earnings on Wednesday, May 4th. Analysts expect Etsy to report earnings of $0.59 per share, which would represent a year-over-year decline of 41%. Revenue is expected to reach $578.18 million, up 5% from the year-ago period.

3. Pinterest

Pinterest is a visual sharing, search, and discovery company that become a winner during the COVID-19 pandemic. Due to lockdowns, millions around the globe flocked to Pinterest has emerged as a top site worldwide for merchants and creators to advertise their products via a unique picture- and video-based format.

In 2021, Pinterest reported a sharp slowdown in year-over-year active users as more people started to leave home again. The company is spending heavily to continue increasing its user base and ways for businesses to build their brand on Pinterest, but it nevertheless is experiencing some growing pains as the pandemic eases. In the past, fintech company PayPal Holdings reportedly expressed interest in acquiring Pinterest.

Pinterest first quarter 2022 earnings that beat analyst expectations, leading the stock up 6%. The company reported revenue of $575 million, above estimates of $573 million. The company also said it expects second quarter revenue to grow about 11% year over year.

4. IAC/InterActiveCorp

Though not well known, IAC has fostered and sold several well-known social media and online interactive platforms. Match Group, the travel and tourism conglomerate Expedia, and the online video and streaming site Vimeo are all outgrowths of IAC.

IAC has a proven track record of investing in and expanding businesses in the social realm of the internet, though its current focus is not strictly social media. The company is presently focused on the home project company - ANGI Homeservices. It is also engaged with other companies such as Dotdash, a conglomerate that includes Investopedia, Simply Recipes, and other websites. It’s also in the process of acquiring Meredith’s media and other publishing businesses.

5. Zynga

Mobile gaming is the largest segment of a large and steadily expanding video game industry. Zynga is one of the largest mobile game production companies, and is responsible for popular titles such as Words With Friends, Zynga Poker, Farmville, and Toon Blast. In 2021, Zynga acquired developer StarLark and its hit game Golf Rival.

Building social experiences and live events through games has been key to Zynga’s success. With a massive user base spanning more than 150 countries, the company is planning to offer more live gaming experiences via its mobile app to keep users engaged and interacting with each other. Besides revenue from in-app purchases, Zynga also generates about one-fifth of its sales from advertising. Its recent acquisition of the mobile ad platform Chartboost is strengthening the social gaming giant’s ability to make money from ad sales.

Zynga is expected to report sales of $735.25 million for the current fiscal quarter, when it reports fiscal results on May 9, 2022. According to Zacks, analysts expect that Zynga will report full year sales of $3.11 billion for the current year, with estimates ranging from $3.02 billion to $3.16 billion. For the next year, analysts forecast that the firm will post sales of $3.41 billion, with estimates ranging from $3.34 billion to $3.55 billion.

6. Bumble

Bumbler has emerged as one of fastest-growing dating apps. The company (and its subsidiary Badoo) was founded by a former executive at Match Group’s Tinder. In 2021, Bumble’s initial public offering (IPO) in early raised $2.5 billion in cash, and Bumble stands out for being one of just a few female-founded and -led companies. Bumble is succeeding because it takes a fresh approach to social networking and online dating.

Bumble and Badoo’s basic features are free to use, and the company primarily makes its money from one-time, in-app purchases and premium subscriptions. In less than a decade (Bumble was founded in 2014), this top dating and relationship service has accumulated millions of users worldwide and is still expanding rapidly, forecasting double-digit percentage sales growth for 2021.

In a recent filing with the SEC, JPMorgan reported it had bought 3.5 million shares of Bumble stock. Other institutional holders with Bumble stock include Blackstone, Vanguard Group, Winslow Capital Management and Accel Growth Fund. Bumble Inc, the parent company of Bumble, Badoo, and Fruitz, will report financial results for the first quarter 2022 after market close on Wednesday, May 11, 2022.

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