5 Of The Best Social Media Stocks To Invest In Today

Jan 19, 2021 11:09 PM ET
5 Of The Best Social Media Stocks To Invest In Today

Social media is the most important form of communication today. Instead of phone calls and SMS, most people are now using a variety of free social media platforms. While most of these platforms are free, they are big business, generating billions of dollars every day. In this article, we’ll look at the best social media stocks you should consider today.

Sprout Social (SPT)

Sprout Social is not a direct social media company, like Facebook and Twitter. Instead, it is a software-as-a-service (SAAS) company that helps companies manage their social media platforms. 

Through its platform, companies can schedule posts across various channels and reply to messages at once. It also uses data to provide insights to companies about their services. Sprout competes with Hootsuite, a Canadian private company that is valued at more than $1 billion.

Sprout Social has more than 25,556 paying companies from around the world. Its revenue has grown from $44 million in 2017 to more than $123 million in the past twelve months. Its losses have also more than doubled during this time, and its market cap has risen to more than $2.5 billion.

Sprout Social is a good investment because of its strong and differentiated offering. It is also a high-growth company that is competing in a $50 billion industry. Finally, it will benefit from the growth of the social media industry.

Sprout Social (SPT) chart

Facebook (FB)

Facebook has grown from a relatively small social network to the fifth-largest company in the United States. It has a market cap of more than $715 billion. It generates more than $78 billion every year, making it the second-biggest advertising company in the world after Google. It is also one of the most profitable businesses, with a net profit of more than $25 billion every year. In 2011, this profit was about $1 billion.

For starters, Facebook owns several popular assets that have more than 2 billion users every month. It owns the eponymous Facebook platform that helps people communicate. It also owns Facebook Messenger, WhatsApp, Instagram, and Oculus.

There are several reasons why Facebook is an ideal social media stock to invest in: 

It has one of the best balance sheets in the world. It has more than $55 billion in cash and short-term investments, and no debt. This means the company has unlimited resources to fund any acquisition. It also has funds to fund research and development (R&D). 

Facebook has the biggest market share in social media. This means that its products are difficult to replicate. Third, Facebook has a large opportunity in areas that are fast-growing, like payments and e-commerce.

Facebook (FB) chart

Alphabet (GOOG)

Alphabet is the parent company of Google. As such, the company is not necessarily a social media company. Instead, Alphabet makes most of its money through search engine advertisements. However, Alphabet is also the owner of YouTube, a company that provides social media services. It also provides many services to social media companies like Snap and Pinterest.

Alphabet is the fourth-largest company in the world after Apple, Microsoft, and Amazon. It has a market cap of more than $1.1 trillion and annual revenue of more than $171 billion. It is also highly profitable, with annual profits of more than $36 billion. 

Like Facebook, Alphabet also has a clean balance sheet, with more than $132 billion in cash and short term investments and just $12.8 billion in debt. In fact, the company makes more than $2.1 billion in interest income while spending $2 billion in interest payments.

In addition to these, there are other benefits of investing in Alphabet. First, it is a highly-diversified company with incomes from advertising, subscriptions, and cloud computing. Second, its YouTube asset is the biggest video social media company in the world. Third, the company has a large market share in most industries that it competes in.

Alphabet (GOOG) chart

Twitter (TWTR)

Twitter is a micro-messaging company that has a strong market share in the industry. The company’s primary asset is Twitter, a platform that helps people to share news and engage. It has a market cap of more than $35 billion. Its revenue has grown from just $106 million in 2011 to more than $3.4 billion. Before the pandemic, Twitter used to generate more than $1.4 billion in profits. 

Twitter also has a strong balance sheet. It has more than $7.6 billion in cash and about $3 billion in total debt. This means that the company can continue investing in growth and also acquiring new companies.

There are two main reasons why Twitter is a strong social media company to invest in. First, it is a company with a strong and growing user-base. Second, the company is a good acquisition target since it is not all that big.

Twitter (TWTR) chart

Snap (SNAP)

Snap is a relatively new social media company that is mostly used by young people. A majority of its users are less than 25 years old, which makes it a good platform for advertisers.

Snapchat has more than 249 million monthly active users, making it one of the biggest social media companies in the world. Further, most of these users are in relatively affluent countries, making the revenue per user a bit higher than that of other companies. 

Snap’s revenue has been growing, despite the high competition from Instagram. It had grown from $58.7 million in 2015 to more than $2.15 billion in 2020. It has never made a profit since it invests its income back to business.

Snap makes a good investment because of the large number of users and the potential profitability in the future. It is also a good acquisition target. 

Snap (SNAP) chart

Summary

Social media stocks have done better than the overall stock market in the past few years. That’s because these companies have managed to successfully disrupt the traditional advertising industry. They also have high margins, which has helped boost their balance sheets. While the five stocks we have mentioned are the best, there are other notable mentions like Pinterest and Match Group.


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