While not as innovative or disruptive as it used to be, social media remains a rapidly-growing industry. With 3.8 billion users in 2021, it’s expected to reach 4.4 billion by 2025! Primary revenue sources come from advertising, but social media is evolving, generating income from e-commerce, digital payments, and gaming.
If you’re thinking of investing in the social media space, these three are among my top long-term picks in this space. Each company provides some reasonable speculative upside over the next decade or longer.
Pinterest (PINS)
Pinterest (NYSE:PINS) thrives in the diverse social media landscape, with its visual discovery appeal.
Recently, PINS stock has been on the ascent, garnering analyst attention for its growth potential amid the global ad rebound, possibly drawing users from Twitter. I expect a strong second half of 2023, particularly as the company reports numbers and its updated guidance over the longer-term.
Pinterest‘s growth prospects are backed by positive Q2 2023 results. The company’s revenue and EBITDA increased, driven by strong user growth. Pinterest’s average revenue per user in emerging markets rose from $0.10 to $0.12, although it’s lower than the global an average revenue per unit (ARPU) of $1.53. The company’s emphasis on user-friendly features, combined with R&D investments, should enhance user growth and advertising revenue.
In Q2 2023, Pinterest had 246 million monthly users outside the U.S. (53% of total) with ARPU of 12 cents (2% of U.S. ARPU). A potential ARPU increase to 10% could significantly boost revenues and profits. CEO Bill Ready highlighted improved ad performance and e-commerce features. Patience should pay off.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) boasts 3.8 billion monthly users, driven by diverse apps. New products like Threads and Reels enhance its growth potential.
Notably, the social media giant has been leveraging “hooks” to enhance Threads’ potential. It generates revenue from major platforms, commits to AI innovation, and embraces the metaverse concept.
Additionally, Meta Platforms stock hit a seven-year low at $88 in November, but rebounded nearly 240% since then due to rising ad revenue. China’s cross-border e-commerce growth benefits Meta Platforms, offering short-term revenue from Chinese ad spending.
This revenue aids Meta in expanding Reels to rival TikTok and adapting to Apple’s iOS changes. With expected growth rates of 14% in revenue and 56% in earnings this year, META stock, trading at 19-times forward earnings, is an attractive investment.
Meta offers strong fundamentals, profitability, and AI investments, particularly in Llama 2. This is a truly stable long-term tech company worth considering on its own merits. It also provides speculative upside tied to AI, making the metaverse worth considering.
Snap Inc. (SNAP)
SNAP Inc. (NYSE:SNAP) has experienced a strong stock price rebound, surpassing the 20-day exponential moving average (EMA). Bulls are eyeing a gap near $12.00, with a bullish pattern suggesting sustained buying momentum ahead.
Snap introduced Dreams, a novel AI feature, on Aug. 29, lifting its stock by 5%. Despite challenges in the ad industry, Snap’s potential makes it an enticing buy opportunity, currently trading 87% below its all-time high. Moreover, Snapchat expands augmented reality (AR) advertising tools to businesses beyond its platform through AR Enterprise Services. It introduces Snapchat+ with 4 million subscribers, monetizing Dreams, and may explore generative AI tools for advertising.
Snap’s potential revenue growth could surge with improved revenue per user, as it aims for a 13.9% revenue increase in 2024. With Snap stock down 87% from its peak, investors holding for the long term could see substantial gains.
A more speculative pick, I think SNAP stock is best-served for those with high thresholds for volatility. Over the next decade, this is a stock with the potential to really outperform if it starts bringing in better numbers.
On the date of publication, Chris MacDonald has a LONG position in PINS, SNAP, META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines