Investment Opportunities In The Social Media Industry

Social media companies have been in the news regularly in recent weeks. Sometimes, the news has fueled interest in social media, particularly when President Donald Trump uses Twitter to make policy announcements or comment on political opponents. On other occasions, the news has been bad such as when Facebook was accused of violating its customers’ privacy.

It’s clear that news about social media often significant impacts the stock prices of companies in the industry. On March 20, reports about the political consulting company Cambridge Analytica misusing Facebook users’ personal information and concerns that the U.S. government would investigate Facebook because of the security breach caused the stock prices of Facebook, Twitter, and Snap Inc., the owner of the message and photo-sharing Snapchat application, to “free fall,” according to Fast Company business magazine.

Facebook and Twitter Stand Tall

Wealth Authority wanted to dig deeper than the recent business news about the social media industry, so we researched the recommendations of stock experts to ascertain whether investing in social media companies could be profitable. By and large, the answer was ‘yes.’

In fact, Twitter is among “5 of the Best Stocks to Buy for April” according to U.S. News & World Report, and Facebook is one of “10 Stocks That Are Screaming Buys Right Now” reports TipRanks, a company that ranks financial analysts. Yes, Facebook and Twitter are among the best investment opportunities regardless of industry, according to some investment experts.

At the close of trading on April 18, one share of Twitter stock was worth $31.54 and one share of Facebook stock was worth $166.36. Two analysts with a strong record of recommending stocks that have produced profits for investors are projecting that a share of Facebook stock will be worth in the $240 range this year, reports TipRanks. Altogether, 28 of TipRanks’ 31 analysts rated Facebook a “Strong Buy.”

Twitter as a business has had far less success than Facebook, but it had revenue growth in its most recent three-month quarterly report for the first time in one year as well as “impressive profits” U.S. News & World Report noted. Other analysts are also bullish about Twitter, which dramatically outperformed Facebook and Snap in 2017 and early, 2018, reported the CNBC article “The best social media stock by far this year is not Facebook or Snap — it’s Twitter.”

The value of a share of Twitter stock increased more than 130 percent from March, 2017, through March, 2018, while the value of a share of Facebook stock increased about 30 percent during that time and the value of a share of Snap stock has declined in the past two years.

Twitter’s financial struggles could be in its rear-view mirror, some analysts believe. “User engagement is up, advertising is up and so is earnings,” wrote Jon Dulin in the article “Social Media Stocks Are Hot. Here Are The Ones to Invest In.” “As a result, investors are looking at this stock in a new light. Only time will tell if Twitter can continue to deliver but I would be a buyer in this stock if the price pulls back just a bit. For me, the risk is worth the potential return.”

Dulin, however, wrote that Facebook is “hands down” a better investment than Twitter. He is particularly impressed by Facebook’s decision to require businesses to pay to get their posts in users’ news feeds.

“This is a win for users, whose news feeds will no longer be dominated by ads,” he wrote. “It’s a win for businesses as they can get their message to exactly who they want. And it’s a win for Facebook in terms of happier customers and higher revenues.”

Long-Term Projections

While most investment analyses of social media stocks focus on Facebook, Twitter, and Snap, the social media industry also affects companies that own social media outlets.

The five top social media stocks according to Investing News Network are Google, Facebook, Yahoo!, Twitter, and LinkedIn. Google, which is owned by Alphabet Inc., is listed as a social media stock because YouTube is a Google subsidiary. Yahoo, which is owned by Verizon, has several social media outlets. LinkedIn is owned by Microsoft.

An article by The Motley Fool lists the 11 largest “social media brands” in order of market value, their price-to-earnings ratio, the number of users each company’s largest social media outlet has, and what each company does. Alphabet, Microsoft, and Facebook have at least 25 times the market value of No. 4 Snap. The fifth through 11th-largest social media companies are Twitter, IAC (owns Angie’s List), Match Group (owns Match and Tinder), Yelp, Zynga, Groupon, and Meet Group.

The long-term outlooks for some of these companies include:

* ALPHABET GOOGLE: A share was valued at $1,075.39 when the markets closed on April 18. The Economy Forecast Agency projects a share will be valued at $980 on June 30, $1,072 at the end of 2018, $1,214 at the end of 2019, and $1,208 on April 30, 2020.

* MICROSOFT: A share was valued at $96.44 on April 18. The Economy Forecast Agency projects a share will be valued at $89 on June 30, $100 at the end of 2018, $129 at the end of 2019, and $130 on April 30, 2020.

* VERIZON: A share was valued at $48.62 on April 18. CNNMoney consulted 32 stock analysts about Verizon. Twenty-two recommended holding Verizon stock, while the other 10 had a “Buy” recommendation. The 25 analysts who projected the price of Verizon stock one year from now forecast a median price of $56.

* FACEBOOK: A share was valued at $166.36 on April 18. The Economy Forecast Agency projection is less bullish than the TipRanks forecast cited earlier. It projects a share will be valued at $150 on June 30, $151 at the end of 2018, $188 at the end of 2019, and $197 on April 30, 2020.

* TWITTER: A share was valued at $31.54 on April 18. CNNMoney consulted 39 stock analysts about Twitter. They were more bearish than the analysts mentioned earlier. Twenty-one recommended holding Twitter stock, seven had a “Buy” recommendation, seven had a “Sell” recommendation, and four projected the stock would underperform. The 32 analysts who projected the price of Twitter stock one year from now forecast a median price of $28.

* SNAP: A share was valued at $14.65 on April 18. CNNMoney consulted 36 stock analysts about Snap. Eighteen recommended holding Snap stock, seven had a “Buy” recommendation, eight had a “Sell” recommendation, and three projected the stock would underperform. The 29 analysts who projected the price of Snap stock one year from now forecast a median price of $16.

Obviously, many investment analysts disagree with others, but Wealth Authority wanted to present as much information as possible. We encourage you to do even more research before making an investment decision.

Regards,

Ethan Warrick
Editor
Wealth Authority


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