Social-media stocks have had more salt sprinkled on their wounds in the first quarter. With high-tech stocks continuing to take the brunt of the damage, questions linger as to whether the rate-induced pain will subside.
At this juncture, many plays within the social-media space remain incredibly expensive, but not all social stocks are built the same. Some seem better poised to move on than others, with valuations that are heavily tilted to the lower end of the historical range.
Others, while seemingly more expensive, have growth profiles that could easily justify their seemingly lofty price-to-sales multiples, even in a rising-rate environment.
Undoubtedly, the social-media corner of the tech scene is an intriguing place to look for growth-hungry contrarians. In this piece, we used the TipRanks stock comparison tool for Social Media stocks to compare Meta Platforms, Pinterest, and Snap. Let’s take a closer look.
Meta Platforms (FB)
Meta Platforms stock shocked many when it crumbled following the release of its meager earnings report. Though Daily Active Users (DAUs) showed signs of weakness, it’s still hard to ignore the ample amounts of cash flow the firm still generates from its Family of Apps.
At writing, shares trade at a mere 13.8 times trailing earnings, making it the cheapest stock of the FAANG group. Undoubtedly, investors saw smoke in the company’s last quarter, but is there anything more than just smoke? Facebook’s top rival TikTok may be gaining in popularity, but it’s unlikely to be an existential threat to one of the original pioneers in the social media space.
In any case, investors aren’t nearly as willing to pay up for the FAANG cohort, even as the profits continue flowing in while Zuckerberg and his “metamates” look for solutions to counter the recent competitive headwinds that have weighed so heavily on the stock of late. I think it would be a mistake to discount Zuckberg’s talent.
Indeed, it has been quite a while since the man pulled the curtain on something as game-changing as Facebook, but don’t think for a second that he’s lost it or is ready to fade into the background of a company that still reeks of innovation.
With 10-year note yields rising by the day, Meta’s big metaverse bet looks like it could be weighing on FB stock’s multiple. It looks like a cash-losing initiative or even a roll of the dice by a Zuckerberg who’s thinking way too far into the future.
According to Bloomberg Intelligence, the metaverse could be worth $800 billion in 2024. Even if Meta isn’t destined to become a leader in the digital spaces of tomorrow, I think it’s unwise to dismiss Zuckerberg’s metaverse ambitions as merely a diversion from the pressures facing the social-media side of its business.
Zuckerberg’s ability to play defense in the face of rising competition in social media seems to be heavily discounted. Further, the metaverse push is no laughing matter, as even capturing a modest slice of the budding market could mean considerable gains for the stock.
Wall Street analysts remain incredibly bullish on Meta, and they’re right to be. The average Meta Platforms price target is $322.48, implying 53.5% upside from current levels.
Pinterest (PINS)
Pinterest stock is another sinking ship in the social media scene of late. The visual-discovery engine isn’t just another run-of-the-mill social media platform, though. It’s an intriguing firm that could have a front-row seat to the “social shopping” space, a market that lies between e-commerce and social media.
Undoubtedly, the incredibly-popular social media firm makes for a very intriguing takeover target after its brutal 76% peak-to-trough slide to $21 and change per share. Ideally, the firm would be an exciting pick-up for e-commerce or e-commerce-focused payments players keen on skating towards where the puck is headed next in the fast-evolving e-commerce space.
For now, Pinterest remains one of those “expensive” tech companies that may or may not remain profitable moving forward. Though the company has been in the green for three straight quarters, it may have to ramp up on R&D spending if it’s to make the most of the long-term monetization opportunities at hand and fend off rivals like Meta’s Instagram.
Personally, I think Pinterest should forego near-term profitability to enhance the power of its platform. Though, I wouldn’t be surprised if the firm can out-innovate its peers while maintaining profitability. If it can do such, the recent barrage of selling may prove overdone.
Wall Street analysts are overwhelmingly bullish, with the average Pinterest price target being $37.86, implying 76.4% upside from current levels.
Snap (SNAP)
Snap stock is attempting to stage a comeback after a more than 70% drop from peak to trough. At around $32.40 per share and 12.5 times sales, SNAP stock is not cheap, but it’s also not as expensive as it could be, given the unique innovations going on behind the scenes.
Like TikTok, Snap has found a spot with younger audiences. If anything, Snap may evolve to become a bigger threat to Meta than TikTok, given its intriguing AR efforts. Snap’s Spectacles are unlikely to be the piece of hardware that propels mixed reality to the forefront. Still, there’s no denying the software that could face a smoother transition into the metaverse.
In the fourth quarter, Snap reported some very solid results, with continued user growth and monetization, even in the face of Apple’s (AAPL) adverse iOS privacy changes. Fourth-quarter revenues rose 42% year-over-year, while DAUs rose an impressive to around 54 million, an impressive 20% year-over-year.
Wall Street analysts remain bullish on SNAP stock, with the average SNAP price forecast being $53.73, implying 66.7% upside from current levels.
The Bottom Line
Meta, Pinterest, and Snap are top social media stocks that have been crushed of late.
As the cheapest of the batch, Meta Platforms seems to be most resilient in the face of higher interest rates. It’s gushing with cash. That said, weak DAUs may be a cause for concern if the firm can’t put a stop to the trend in the face of growing competition.
Overall, Wall Street analysts are very bullish on all three names, with PINS stock having the most implied upside.
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