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3 Social Media Stocks That Beat the Pandemic

Zacks Equity Research

Social distancing measures amid the coronavirus pandemic have been rather difficult for everyone. While people remain locked indoors, social media companies offer huge respite from boredom that often becomes unbearable.

These companies have not only welcomed new users over the past couple of months but also have taken many steps to ensure engagement and good browsing experience. Let us thus take a look at how these companies have performed since the pandemic broke out and the factors likely to push them ahead.

3 Social Media Stocks That Gained Despite the Odds

Topping the list of social media companies are Facebook, Inc. FB, Twitter, Inc. TWTR and Snap Inc. SNAP that have fared well during the pandemic. Shares of these three giants have returned decently so far this year and year-over-year revenue growth impressed in recently released results.

Each of these companies carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook has taken a series of steps to ensure its user base remains intact. Although the company warned of "unprecedented uncertainty" for the future of its ad business, it witnessed a significant spike in the number of new users. Facebook has witnessed a surge in users of the social network to stay in touch with family and friends during the virus-triggered lockdown.

Facebook said that its monthly active users increased to 2.6 billion, marking a 10% rise from the same quarter a year ago. In addition, nearly 3 billion people used at least one of Facebook's apps, namely Instagram and WhatsApp.

The company’s first-quarter revenues of $17.74 billion comfortably surpassed the Zacks Consensus Estimate by 2.6% and rose 17.6% on a year-over-year basis. At constant currency (cc), the top line improved 19%. Facebook’s expected earnings growth rate for the current year is 12.8%. Shares of the company have risen 14.4% on a year-to-date basis.

Twitter has been a prominent platform for people to voice their opinion. In the United States alone, the company has about 48.35 million monthly active users, of which 31 million participate in the platform’s daily activity. A good number of international users also helped the company in the past few months.

A major driver of the famous platform is its highly influential user base, including President Donald Trump and other heads of countries. This is why anyone who wants to keep up with the most recent news and tweet is active on Twitter, and thereby drives its traffic.

This puts Twitter among the top social media stocks to watch. The company’s expected earnings growth rate for next year is 43.9%. Shares of Twitter have risen 1.7% on a year-to-date basis.

On Apr 30, Twitter reported first-quarter 2020 non-GAAP earnings of 11 cents per share that surpassed the Zacks Consensus Estimate by 10%. In addition, revenues grew 2.6% year over year to reach $807.6 million, which also beat the Zacks Consensus Estimate by 4.5%.

Another company that witnessed a spurt of new users was Snap. The company’s famous app Snapchat gained as many as 11 million daily active users during first-quarter 2020, thus taking the total user count to 229 million. Its 11 million new users represent about 20% rise over 2019. Digging deeper into first-quarter 2020, as many as 4 billion snaps were posted each day during the three months.

In addition, the time spent on voice and video calls grew more than 50% in late March as compared to the month-ago period. The majority of the application’s users are Gen Z, which is between ages 13 and 24.

The company’s first-quarter revenues surged 44% from the year-ago quarter to $462.5 million, beating the consensus mark by 9.1%. Revenues were within the guided range of $450-$470 million. Snap’s expected earnings growth rate for the current year is 43.8%. Shares of the company have risen 8.3% on a year-to-date basis.

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