3 Best Social Media Stocks To Buy

The question isn’t whether to buy social media stocks. The debate about whether social media will stick has been over for years. In the current environment, business leaders know that social media marketing is a must to stay competitive, and many are transitioning key functions like customer service and technical support to their social media channels in response to consumer demand. In other words, from a usage perspective, there is nowhere for social media to go but up. 

The real question for investors is, which are the best social media stocks to buy? Does it make more sense to put money into trusted platforms like Facebook (FB) and Twitter (TWTR), or is the real growth going to come from new kids on the block like Bumble? 

As with any investment, the answer depends on the structure of your portfolio, your risk tolerance, and your financial goals. However, the general consensus is that these are three of the best social media stocks to buy.

Is Snapchat Stock a Buy?

Snapchat (SNAP) has both a compelling history and a strong future. It gained attention from the post-Facebook generation because it offers a special feature: photos and videos that disappear quickly.

That’s attractive for users who have grown tired of constantly monitoring their social media presence after being told again and again that their posts would be around forever, putting college acceptances and job prospects at risk. 

This platform grew so quickly that it even caught Facebook CEO Mark Zuckerberg’s eye. In 2013, he indicated that he wanted to buy Snapchat and integrate it into Facebook. He offered $3 billion for the company, but he was quickly rebuffed by Snapchat co-founders Evan Spiegel and Bobby Murphy.

As it turned out, they made the right move. When Snapchat held its IPO in March 2017, the company was valued at $24 billion. Today, that figure has exceeded $90 billion. 

As of the first quarter of 2021, Snapchat reported that it hosts around 280 million users each day. That’s up 22 percent year-over-year. Daily Active Users (DAU) is a critical metric for measuring social media success, as the company’s ability to generate advertising revenue depends on this figure. 

Snapchat’s first-quarter revenue came in at $770 million, which represents year-over-year growth of 66 percent. The company isn’t profitable – yet – but investors appear convinced that it will be. Demand for shares has been trending up, and Snapchat’s stock increased more than 180 percent over the past 12 months. 

Facebook Ad Revenue Growth

Facebook has been pushing the boundaries of technology since its inception, and there are no signs that growth is slowing down. Share prices have gone up by more than 40 percent over the last 12 months, driven in part by increased interest from socially isolated and quarantined users during the pandemic.

Ad revenue was already trending up, and the company is expecting further growth as life returns to pre-pandemic norms. Businesses are getting back to standard operations, and that means renewed interest in online marketing. 

Facebook reported 2020’s revenue at a whopping $86 billion. That’s a 22 percent increase year-over-year, with net profit up 58 percent to $29 billion.

In the first quarter of 2021, revenue was up 48 percent year over year, and net profit increased by 94 percent. That was driven in large part by Facebook’s ability to charge more for its ads, coupled with a 12 percent increase in advertising volume. 

Facebook VR Initiatives

While ad revenue might be the biggest driver of Facebook’s revenue today, many industry experts believe the company’s next projects might be spark further massive growth. Facebook is focused on growing its ecosystem by leveraging its virtual reality (VR) division, Oculus – a company Facebook acquired in 2014. 

CEO Mark Zuckerberg has long aspired to grow the depth and breadth of the social media experience. Expanding and enhancing virtual reality and augmented reality promise to do just that by deepening the communities users create online. 

Investors are carefully watching the development of Horizon, Facebook’s proprietary virtual world. As users become more involved in exploring and creating within this new space, Facebook is expected to capture an even larger share of the social media market. 

Facebook Moonshot Projects

As if building an entirely new virtual world wasn’t enough, Facebook Moonshot projects promise – among other things – better access for more users. For example, one Moonshot project, the Aquila involved designing a solar-powered drone to provide Internet service to remote areas. 

The drone would beam down lasers, so people can connect online. Where would they start their web-based journey? Very likely with the social media giant that brought them internet access in the first place. Even as this project has run into brick walls, Facebook continues to pursue others aimed at sparking next generation user experiences that could catalyze further growth.

The bottom line is that Facebook remains far and away one of the best social media stocks to buy because of its commitment for innovating and delivering the technology of the future. 

Why Bumble Is An Attractive Investment

Newcomer Bumble is an interesting investment choice, given its recent entry into the market. It is a new type of dating app intended to transform the experience of making online connections by empowering women to make the first move. 

Bumble was developed in response to the pain points experienced by women using traditional platforms like Match.com and Tinder – for example, high-pressure advances from an endless collection of catfishers, as well as non-stop unsolicited personal images. 

For heterosexual users, conversations can’t begin unless the woman initiates the interaction. In the case of same-sex users, either can initiate the interaction. That immediately eliminates a large percentage of problematic communication right away.

The company reported 42 million Monthly Active Users (MAU) as of January 2021. That makes Bumble one of the most popular dating apps in the United States, second only to Tinder.  

Will Bumble Stock Recover?

Since its launch, Bumble took its earliest investors on a roller coaster ride, and share prices have since dropped below the initial IPO figures. However, a majority of industry experts believe this is just new-stock jitters, and most are encouraging investors to buy now at what are likely discounted levels. 

Bumble announced its first-quarter earnings in May, and it met or exceeded analysts’ expectations. Revenue increased by 43 percent year-over-year to a total of $170.7 million – more than $6 million higher than projected. And future revenues look even brighter.

More importantly, the company reported a net profit of $1.69 per share, though analysts had expected the company to see a loss. Granted, the profits were due in large part to a tax benefit the company received, but full-year guidance still looks quite promising. 

Business leaders indicated their expectation that revenue will grow by 34 percent to 35 percent for the year, and adjusted earnings will increase by 24 percent to 27 percent. By any measure, that makes Bumble one of the best social media stocks to buy. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.