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Better Buy: Facebook (FB) vs. Twitter (TWTR)

Benjamin Rains
At this point, nearly every investor knows that social media has become a worldwide phenomenon, spurred by the proliferation of mobile devices and internet access. Today there are a seemingly endless array of platforms that hold users' attention for hours every day.

At this point, nearly every investor knows that social media has become a worldwide phenomenon, spurred by the proliferation of mobile devices and internet access. Today there are a seemingly endless array of platforms that hold users’ attention for hours every day.

Social media use in the U.S. is set to reach new heights this year, according to a recent report from market research firm eMarketer. The U.S. social media user base is expected to fall just 32 million shy of the entire U.S. adult television audience in 2018, which would account for over 61% of the total U.S. population.

Last year, an estimated 2.48 billion people used social media around the world, marking an 8.7% jump from 2016. By 2021, the total number of social media users around the globe is expected to reach 3.02 billion.

Ubiquity and user growth leads directly to advertising dollars, and ad spending is essentially the only way social media powerhouses like Facebook FB and Twitter TWTR make money.

But with total users set to grow overall, which of these two widely popular publicly traded social media companies is the better buy right now?

User Growth

Facebook reported that as of the end of September, its monthly active users total 2.07 billion, which marked a 16% year-over-year jump. Facebook now claims over 27% of the world population as an MAU. Facebook was also able to grow its daily active user base—a highly important metric for advertisers—by 16% to reach 1.37 billion.

During the third-quarter, Twitter grew its DAU base by 14% year-over-year. This marked the fourth consecutive quarter of double-digit growth in this category. Twitter was also able to grow its monthly active user base by 4% in Q3. The social media company now boasts 330 million MAUs.

Top and Bottom-Line Growth

Looking ahead to the fourth-quarter of 2017, Facebook is projected to see its revenues soar 42.62% year-over-year to hit $12.56 billion, based on our current Zacks Consensus Estimates. On top of that, the social media giant is expected to see its bottom-line surge by 37.59% to reach $1.94 per share.

What’s more, Facebook is expected to expand its EPS figures at an annualized rate of 26.82% over the next three to five years.

Our current Zacks Consensus Estimates call for Twitter’s Q4 revenues and earnings to dip by 3.76% and 12.50% respectively. However, 2018 is projected to be a bounce-back year for the micro-blogging platform.

Twitter’s full fiscal 2018 sales are expected to reach $2.57 billion, which would mark a 7.35% year-over-year jump. The company’s bottom-line is projected to pop by nearly 13% to hit $0.45 per share. In terms of long-term earnings growth potential, Twitter is expected to see its EPS figures grow at an annualized rate of 21.50% over the next three to five years.

Momentum

Over the last 12-weeks, Facebook has seen its stock price climb 4.10%. But shares of the social media company dipped marginally in the last four weeks. Still, Facebook has seen its stock price surge by 38.84% over the last 52 weeks.

Investors might be happy to note that Facebook stock currently sits over 5% below its 52-week high of $188.90 per share, which should theoretically give the company room to expand before the added burden of crossing into a new all-time high range.

On the other hand, shares of Twitter have skyrocketed 43.29% in the last 12 weeks, which blows away the S&P 500 and the “Internet – Software” industry average. This great three-month run accounts for nearly all of the company’s gains over the last year.

However, Twitter saw its stock price slip by nearly 2.50% on Thursday. And even before today’s dip, shares of the company fell by 2.54% over the last four weeks.

The Winner Is…

Both Facebook and Twitter are currently Zacks Rank #2 (Buy) stocks that sport “A” grades for Growth and Momentum in our Style Scores system, helping them earn overall “B” VGM scores.

The winner at this point has to be Facebook. Few companies in the world have as much clout as Zuckerberg’s, especially in terms of advertising reach. According to eMarketer, by 2019, Facebook will account for 11.3% of all U.S. ad spending compared to 10.0% for the entire print category.

Facebook is set to report its fourth-quarter and full-year 2017 results on Jan. 31. Twitter is set to report Q4 results before the opening bell on Feb. 8.

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