The Next Meta Platforms? 3 Social Media Stocks That Investors Shouldn’t Ignore.
I don’t think there’s any question that Meta Platforms (NASDAQ:META) has got its groove back after spending too much time in the metaverse. As a result, Mark Zuckerberg’s net worth has increased by nearly $42 billion through the first six weeks of 2024, making it undoubtedly the champion of social media stocks.
Are there others that come anywhere near Meta’s prodigious cash flow generation? I doubt it. That said, it’s hard to imagine Meta being the only social media platform lasting more than one of two economic cycles.
Who are the other possible challengers to Meta Platform’s crown as social media dynamo? Likely, it hasn’t even been created yet.
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An impressive 62 analysts cover META stock, with 53 (85%) rating it a Buy, with a target price of $525, 11% higher than where it’s currently trading. It’s the gold standard in social media.
However, here are my suggestions for those looking for social media stocks other than META to buy now.
Social Media Stocks to Watch: Pinterest (PINS)
Source: DANIEL CONSTANTE / Shutterstock
I selected my three social media stocks from the Global X Social Media ETF (NASDAQ:SOCL), which tracks the performance of the Solactive Social Media Total Return Index.
The ETF currently has 43 holdings, with Meta being the top stock, with a weight of 13.08%. The third-largest holding is Pinterest (NASDAQ:PINS), with a 9.22% weighting.
Pinterest has always been my favorite social media stock because it’s visually driven with a desire for positivity in its message and user engagement. CEO Bill Ready recently sat down for an interview with Financial Times contributor Hannah Murphy to discuss the toxicity of social media and how its most prominent players can fix it.
Writing about stocks as I do, I’ve experienced many occasions where investors are unhappy with my commentary, have gone off half-cocked on LinkedIn, etc., telling the world how awful I am for being so pessimistic about this stock or another. If only these people would save their energy for positive contributions to social media, I’m confident the world would be a better place. But, I digress.
Ready and the rest of his company are doubling down on positivity. And while we’ve seen this act many times before, I will always back those with the conviction to try to deliver a product that’s simultaneously good for the customer and the company. A win/win, if you will.
I have no idea if Ready’s strategy will be successful.
However, I hope it is. We need something to counter Elon Musk’s dark vision for social media. With 498 million MAUs (monthly active users), it could play a big part in brightening the internet while also making its shareholders stinking rich.
What’s not to like?
Alphabet (GOOGL)
Source: Koshiro K / Shutterstock.com
Are you familiar with Simon Owens? He writes a media newsletter on Substack that I like to read from time to time. He’s a super bright individual with many interesting observations about the content creation economy. You should check it out.
On many occasions, Owens has commented about how successful YouTube has become. The more he mentions this, the more I realize just what a deal Google got when it bought the social media platform for $1.65 billion in 2006. That was 18 years ago. I was barely 40.
The Ringer’s Victor Luckerson wrote in 2016:
“Ten years ago this week, Google bought YouTube for $1.65 billion. That figure seems quaint now (it equates to WhatsApp being worth about 13 YouTubes) but at the time it was an eye-popping figure to pay for a startup only a year and a half ol,” Luckerson wrote.
“Some analysts and competitors said Google overpaid. Mark Cuban said the search giant was “crazy” to take on YouTube’s many legal liabilities. Google itself later acknowledged that YouTube wasn’t worth anywhere near the price tag at the time of the acquisition.”
Flash forward to today.
In a Feb. 9 post, Owens points out that YouTube generates more than $9 billion a quarter in ad revenue. As a result, it’s been able to pay out $70 billion to content creators over the past three years. YouTubers are as sophisticated as they come. Jimmy Donaldson generates more than $82 million in annual earnings, much from YouTube.
Google was already an advertising giant. YouTube will only make it exponentially so. Alphabet (NASDAQ:GOOGL) is a wealth of riches.
Yalla Group (YALA)
Source: Postmodern Studio / Shutterstock.com
In February 2023, I recommended Yalla Group (NYSE:YALA) and two other penny stocks to buy. Of the three, the voice-centric social networking platform for people living in the Middle East and northern Africa is the only one to hang in there.
It’s gone sideways over the past year. However, with it down more than 21% year-to-date, I thought I’d revisit YALA to find out why it’s down on its luck.
Looking at its Q3 2023 results, it’s easy to see where the car might have gone off the tracks. Its average MAUs as of Sept. 30 were 35.10 million, up 13.6% from Q3 2022. That’s the good news. The bad news is that its paying users were 11.24 million, 2.6% less than a year earlier.
Ok, but here’s the thing.
Its ARPPU (average revenue per paying user) in Q3 2023 was $7.35, 46 cents higher than a year earlier. Based on 11,236,000 paying users in Q3 2023, the revenue generated from those users would be $82.58 million. In Q3 2022, it would be $79.52 million, or $3.06 million more, despite 305,000 less paying users.
In the third quarter, its non-GAAP operating margin was 41.5%, 470 basis points higher than a year ago. Furthermore, it has more than $3 a share in net cash on its balance sheet as of Sept. 30, so you’re paying about $1.86 a share for the operating business.
I’m not saying you’ll get rich off Yalla Group, but the upside seems far greater than the downside.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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