Due to a hawkish Federal Reserve, social media stocks lost value last year as businesses reduced their ad expenditures. Still, a return to more favorable conditions is anticipated this year. According to IPG Mediabrands, sales will increase by 9.2% in 2024.
If that wasn’t all, Donald Trump is also acting as a tailwind of sorts. Trump Media (NASDAQ:DJT) is one of the most divisive stocks in the market but with a $5 billion market cap achieved in no time, it’s getting hard to ignore.
Amidst all of this, we have three robust social media purchasing stocks that are traveling in separate directions. One is an industry giant that’s also squandering resources on vanity projects while a second fails to capitalize on the rebound underway in advertising spending.
Last is one languishing heartbroken over the departure of its CEO and founder. All in all, there are exciting times are ahead!
Meta Platforms (META)
Thanks to its unrival 3.98 billion monthly active users (MAU), Meta Platforms (NASDAQ:META) is the dominant social media firm. Yet the billions of dollars it squandered on the metaverse might spoil the party. Even so, Meta Platforms leads social media stocks.
Facebook is the gem in the META crown, with 3.05 billion users as of Q4’23 — a 3.44% increase year over year (YOY). That being said, META’s appeal extends beyond Facebook. With over 2 billion active users, Instagram and WhatsApp are also accessible to stockholders.
In all, almost 50% of people on Earth utilize social media, and the majority use at least one Meta platform. Furthermore, Meta doesn’t produce any material. Instead, the users create the content, leading to a 54% operating margin in Q4 2023.
Furthermore, after difficult years in 2022 and 2023, ad spending is up from 19.6% in 2021 to single digits in 2023.
The latest figures from Meta bail out this narrative. Just to put things in perspective, Meta reported $40.1 billion in top-line revenue for Q4 2023, an increase of 25% versus the year-ago period. Out of this total, 98% of revenue is from digital advertising.
But META’s Reality Labs division is losing money — roughly $50 billion over the last five years — which has many worried that the metaverse might stand in the way of Meta’s success. In my opinion, the media conglomerate can take these losses. Plus, a potential market size of $936.6 billion by 2030 means more growth for META stockholders if it succeeds.
Analyst sentiment is certainly bullish with a consensus strong buy recommendation and a slight 3% upside to go with it.
Snap (SNAP)
Sadly, Snap (NYSE:SNAP) has to cook bigger fish. Even with abundant advertising money, it finds it difficult to expand revenue. Snap hasn’t taken advantage of the rebound in ad expenditure, with a 31% decline to start 2024 to change hands for just over $11.
Unfortunately, the stock price fell along with the most recent quarterly report in February. In Q4’23, Snap’s sales increased by a pitiful 5% to $1.4 billion. In 2023, the company’s total sales remained at $4.6 billion from the previous year.
Snap’s user base increased by 10% from the previous year to 414 million in Q4 2023, therefore there are some positive developments for investors. In the end, Snap is a growth stock, and if user numbers are rising, investors often don’t care about the losses.
In addition, Snap is looking to scale recurring revenue options such as the Snapchat+ subscription service, which is a wise choice that could solve the ongoing cash flow problem. On a separate note, Integral Ad Science (NASDAQ:IAS) and Snap are partnering to offer marketers artificial intelligence (AI)-driven brand safety for Snapchat ads. The move will attract Snap’s younger demographic since ESG is a big concern for them.
Analyst sentiment leads me to believe the AI-focused revamp for Snap might work out. The upside is at 25% based on a $14 target price for Snap.
Bumble (BMBL)
The final entry on our list is Bumble (NASDAQ:BMBL), a social media stock at risk due to poor sales projections and Whitney Wolfe Herd’s resignation as CEO and founder.
There’s little question that it will be felt when the company’s founder leaves after more than a decade in leadership. As seen by the circumstances surrounding Bob Iger and Howard Schultz at Disney (NYSE:DIS) and Starbucks (NASDAQ:SBUX), respectively, poor handling of these pivotal exits may cause grave pain.
Growth is Bumble’s other main problem, and investor anxiety is heightened by the company’s gloomy quarterly sales estimate. In the opinion of CEO Lidiane Jones, the firm must appeal to younger consumers to thrive where “true innovation” is missing. That’s why she is revamping the main app and updating the Premium Plus membership to attract more Gen Z users.
Bumble is trying to address low user spending by cutting off 350 workers, or around 30% of its workforce. Bumble is also investigating the application of generative AI. With all these factors, plus a 26% drop in price, this women-first, youth-focused company certainly will attract value investors.
Analysts certainly like to think so, projecting an upside of over 50% to accompany its buy rating.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines