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.
Since the pandemic-induced sell-off in March 2020 though, Snap has been on the rise, soaring over 217% in the past year. Its Q1 2021 results were very impressive. The company reported 280 million daily active users, up 22% YoY. Net loss and Adjusted EBITDA came in at $287 million and $2 million in the first quarter, respectively, compared to losses of $305 million and $81 million in the prior year, respectively.
In the fourth quarter of 2020, the company launched 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. As Snap tries to catch up to its rivals in the short-form video space, to date, the firm has paid out $130 million to creators to encourage more people to use the addition.
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 the rest of 2021 and beyond looks strong and as a result, it is definitely a potential growth stock despite recently hitting all-time highs.
Twitter (NYSE: TWTR) looked to be in a bad spot leading up to the end of 2020 as user growth declined, but the rest of 2021 is shaping up very nicely.
For the first quarter, Twitter reported 199 million monetizable daily active users (mDAUs), up 20% year-over-year (YoY). Total revenue for the quarter came in at $1.04 Billion, an increase of 28% YoY while net income was $68 million, compared to a net loss of $8 million in the same period last year.
These figures are not what has investors excited though. Usually notorious for its lack of innovation, Twitter has finally begun to expand and monetize its product. While ad sales remain a massive revenue driver, the company is also launching a paid newsletter subscription through its acquisition of Revue in January, it has made a TikTok competitor called Fleets and is even taking on Clubhouse with Twitter Spaces.
There definitely seems to be some growth potential going forward for Twitter with these new product offerings. Should it continue on its current growth trajectory, patient investors are likely to benefit.
Okay, Facebook (NASDAQ: FB) can no longer be considered 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, despite the odd bit of volatility.
The controversial social media network has continued to dominate the ad revenue and userspace. With daily users on its products hitting 2.72 billion by the end of the first quarter, and revenue soaring to a record $26 billion, up 46% YoY, things are still looking good for Zuckerberg & Co.
Previously, Facebook has outlined concerns that the shift over to digital advertising and online shopping might not last 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. The biggest concern though is Apple’s new iOS 14.5 update which will massively curb the company’s ability to make money off of iPhone user data. However, Facebook has allayed these concerns and reassured investors that its revenue is in safe hands.
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. As well as this, Facebook is making great strides in the hardware space as its Oculus subsidiary continues to dominate the virtual reality space. Facebook is definitely a worthwhile investment as it continues to expand its product line and enter new industries.
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Contributing Writer at MyWallSt
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.