Social media is here to stay – just ask the billions of worldwide users across a number of platforms. Like it or hate it, it is impossible to ignore. As more people engage with each other through communities and virtual networks, it also means that social media sites wield more power than ever before – but it also means social media stocks will face a high amount of scrutiny.
This isn’t exclusive to the U.S. – governments worldwide have increasingly scrutinized these and other platforms over the enforcement of content moderation, user privacy and other policies.
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Here, we’ll look at four popular social media stocks, and the perceived outlook and upside for each.
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Social Media Stocks:
Which Ones Do the Pros Love?
in Q3
and ETFs
To help make sense of some of the biggest names in social, we’ve decided to tap the TipRanks stock comparison tool, which helps investors compare stocks across different parameters, including key technical indicators, dividend information, consensus price target and analysts' consensus rating.
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Consider that over the past few years, Facebook (FB), Twitter (TWTR) and other platforms have fielded claims from both sides of the political aisle that they favor one political ideology over another and suppress the latter’s ideas.
That’s yet another wild card in what is an already difficult environment for trying to gauge the upside of social media stocks.
It’s not Facebook anymore … it’s Meta (FB).
The company formerly known as Facebook announced Oct. 28 that it was switching its name to “Meta Platforms, Inc.,” or just “Meta” for short, to reflect the growing importance of the so-called metaverse to its business. (The social media stock will switch its ticker too, to MVRS, but the actual social platform will retain the “Facebook” name.)
Facebook has been in the news lately for all the wrong reasons. Recently, whistle-blower Frances Haugen complained to the Securities and Exchange Commission (SEC) regarding Facebook’s policies. The internal documents leaked by Haugen and accessed by the Wall Street Journal detail disarray over how to deal with vaccine information, an internal “integrity” team that was overruled by CEO Mark Zuckerberg several times, and issues dealing with misinformation on Jan. 6, among other things. Haugen also testified that Facebook was aware its Instagram platform was toxic for teenage girls, yet the company downplayed its effect on young girls. Facebook also is dealing with mixed Q3 results. While the TipRanks’ Website Traffic tool shows that year-to-date, the amount of total unique visitors on all devices from its family of domains is up 14.7% year-over-year to 2.9 billion. Still, FB struggled in the third quarter, reporting better-than-expected earnings but disappointing revenues.
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Meta
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Market value: $868.5 billion TipRanks consensus price target: $405.59 (28% upside potential) TipRanks consensus rating: Strong Buy
Regardless, Wall Street analysts remain bullish on Facebook and have rated it a Strong Buy, with a consensus average price target of $409.39 on the stock. In fact, FB is the most highly rated among the major social media stocks right now. Bank of America analyst Justin Post, for instance, acknowledged the IDFA headwind but also said this could have peaked in the third quarter. “FB is guiding to better-than-feared 4Q [quarter-on-quarter] growth, and, despite big investments, core business EPS may be higher-than-expected in 2022 backing out FRL investments," he says.
Post is talking about the augmented- and virtual-reality focused “Facebook Reality Labs,” which will be one of the two new reporting segments under the new Meta structure – “Family of Apps,” which includes Facebook, Instagram, WhatsApp and other services, is the other. He did caution that, “given massive investments which could total well over $50bn before reaching breakeven, we think long-term holders will need to have a strong belief in Facebook’s vision for the metaverse business model to want to hold the stock.” Nonetheless, Post reiterated his Buy rating and raised his price target to $400 per share to $385 per share.
Among the headwinds were Apple’s (AAPL) iOS 14 changes, primarily app developers' inability to track a user’s Apple’s Identifier For Advertisers (IDFA) if a user opts out of sharing privacy details while downloading an app from AAPL’s app store.
Snap (SNAP) calls itself a “camera company.” Its flagship product is Snapchat, a camera app that lets users communicate visually with family and friends through images and short videos.
The company caused a ripple in the social media sector with its recent earnings report, which were extremely adversely affected by Apple’s iOS 14 changes. This stoked investor concerns that other social media companies could also be affected by these changes in Q3 – which they were, but to varying (and mostly lesser) extents.
SNAP stock went into full-blown correction (a drop of 20% or more) after its release. Adjusted earnings of 17 cents per share more than doubled expectations of 8 cents per share, but Q3 revenues, while up 57% year-over-year to $1.07 billion, still fell short of the consensus estimate for $1.1 billion.
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Snap
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Market value: $87.6 billion TipRanks consensus price target: $76.46 (41% upside potential) TipRanks consensus rating: Moderate Buy
Using the TipRanks’ Website Traffic tool and analyzing the data provided by SEMrush (SEMR), it is evident that SNAP still is growing, though slowly. Unique visitors to the site grew approximately 2.8% to 163.7 million users, versus 159.2 million in the same period last year.
Needham analyst Laura Martin remained sidelined, with a Hold rating on the stock. The analyst was of the view that there is a possibility that SNAP “may have already fully penetrated its total super-fan user base, suggesting future rev growth must come primarily from higher monetization/user, which adds risk to growth projections.”
What really irked investors, however, was management’s warning during the Q3 earnings call that the operating environment remains challenging in Q4 due to “iOS platform changes, as well as macro uncertainty driven by supply chain disruption and labor shortages.”
The rest of the Street, however, is optimistic, if cautiously, with a Moderate Buy rating and an average price target of $76.48 (38.1% upside) on the social media stock.
Pinterest (PINS) also has been in the news recently – not about privacy or data use, but about a potential acquisition. However, a few days after rumors arose that PayPal Holdings (PYPL) planned to buy the social network, the company stated it was “not pursuing an acquisition of Pinterest at this time.” Those rumors shot the social media stock from the low $50s to nearly $63 per share, but it has since lost that and much more, shedding greater than a quarter of its value since PayPal demurred.
Pinterest is expected to announce its Q3 results on Nov. 4. The company certainly is on the mend; Q2 revenues jumped 125% year-over-year to $613 million, and adjusted earnings of 25 cents per share were much more welcome than the 7-cent loss it suffered in the year-ago quarter. However, in Q3, Pinterest anticipates that revenues will increase year-over-year in the “low-40% range.”
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Pinterest
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PINS is facing uncertainty when it comes to predicting its monthly active users (MAUs) because, as management explained, the “evolution of the COVID-19 pandemic and related restrictions remain unknown, and we are not providing guidance on Q3 2021 MAUs given our lack of visibility into certain key drivers of engagement.” As of July 27, the company’s MAUs in the U.S. had declined 7%, while global MAUs had risen 5% year-over-year.
Market value: $29.4 billion TipRanks consensus price target: $67.80 (49% upside potential) TipRanks consensus rating: Moderate Buy
This trend is supported by an analysis of the website traffic volume data for Pinterest, which is provided by SEMrush and demonstrated by the TipRanks’ Website Traffic tool. This data indicates that in Q3, the total unique visitors to the site on all devices is down by around 4% year-over-year, showing a drop of approximately 10% quarter-over-quarter to 894.2 million.
Even RBC Capital analyst Brad Erickson (Hold, $58 price target) believes that the social media company lacks user growth and believes that it needs “product-fueled ways to attract new users followed by monetization while operating at a structural data disadvantage vs. the mega-caps [such as Amazon and Facebook].”
Among 17 analysts, Erickson and another 10 pros call the stock a Hold. The remaining six are bullish, however, with a Buy rating on shares.
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Twitter
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Twitter (TWTR) had some good news when it announced its third-quarter results. Namely, Apple’s iOS changes effect on the social media giant were “lower than expected,” according to Twitter management. Moreover, Q3 revenues grew 37% year-over-year to $1.3 billion. Advertising revenue, which made up approximately 89% of Twitter’s total revenues, rose 41% YoY. But things weren’t all rosy.
The company reported a quarterly loss of 54 cents per share, largely as a result of a one-time litigation settlement expense of $810 million. Twitter also said that monetizable daily users (mDAUs) improved by 13% to 211 million, which was shy of estimates by about 900,000 users. That’s despite encouraging traffic trends from TipRanks’ Website Traffic tool, which shows that in Q3, total unique visitors on all devices were up 7.1% year-over-year (and up 3.9% across 2021).
Rosenblatt Securities analyst Mark Zgutowicz (Hold, $65 price target) is of the view that the iOS 14 changes will level the playing field for Twitter, as compared to its peers such as Facebook and Snap. That’s because those companies have
But this bright spot is dimmed in the near-term, says Zgutowicz, as the company’s DR peers are investing significantly in new ad targeting models that can address or workaround the iOS 14 changes.
Analysts are largely mixed on the social media stock, with a consensus Hold view fueled by 14 Holds, four Buys and three Sells.
“historically had much stronger first party data signals [when it comes to direct response (DR) advertising] and subsequently one-to-one targeted returns vs. Twitter.”
