Investors have been turning to social media stocks this year. That’s not surprising as more people are using social media now. Because of lockdowns and social distancing mandates, the only safe way to interact with others is through the digital medium. Social media provides this and a means of feeling connected with our loved ones. Investors are clearly aware of this judging from the performance of some of the top social media stocks in the stock market in 2020. For example, Facebook (FB Stock Report) and YouTube parent company Alphabet (GOOGL Stock Report) have seen their share prices rising steadily since the lows in March.
According to Omnicore, 8 out of 10 Americans are on social media in 2020. With such a large user base, it is no wonder some of the best social media stocks to watch in the stock market today have seen such impressive growth. This trend could continue as the year comes to an end. With the holiday season coming, people will want to connect with one another despite being separated physically. This is great for the industry, but what are the top players doing to stay relevant? This is a crucial question to ask as social media platforms can fade in and out like most hyped trends on the medium.
For investors, it can be a tricky task to determine the most viral social media platforms at the current moment. Sudden trends can shift the user base of certain platforms to another. That’s because users’ preferences may change, and that provides opportunities for different social media platforms to grow, sometimes at the expense of others. Given all this, here is a list of top social media stocks to watch that deserve your attention now.
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First up, we have Snap (SNAP Stock Report). Looking at their performance so far, the camera and social media company appear to have had a fruitful year. This is evident from the impressive growth in its share prices year-to-date of over 200%. This morning, however, the stock appears to be taking a little breather in line with the broader market, easing 1.02% as of 10:16 a.m. ET.
Snap had a fantastic quarter as its third-quarter fiscal was a treat for investors. The company reported a 52% increase in total revenue year-over-year. Moreover, Snapchat also saw an 18% increase in daily active users in the same period. The unique aspect of the platform is the smooth integration of augmented reality (AR) features within its camera app. CEO Evan Spiegel commented, “The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us.” This is supported by the over 1.5 million AR filters created by the Snapchat community as of the end of the quarter. Despite the stellar results so far, investors are likely wondering what the company has in store next.
In line with its focus on AR, the company just announced a $3.5 million fund for its AR filter development. This is a spectacular play by the company as it will incentivize more creators and developers to continue to innovate using its AR technology. Likewise, Snap also announced upgrades for its AR software to accommodate this. The company is clearly aware of its strong points and continues to move ahead of the pack in that sense. Will this be enough to propel SNAP stock well into 2021? You tell me.
Microblogging site Twitter (TWTR Stock Report) needs no introduction. The company’s share prices rose by over 9% just yesterday. This came after the company announced a collaboration with Snap. The alliance will see improved integration of the two apps. Twitter users will now be able to share their favorite tweets on the Snapchat platform. Previously, Twitter users have done this via screenshots. While the change may seem minor, it could allow Twitter to better track the sharing of tweets across platforms. Who knows, that might just lead to more monetization opportunities down the line. In addition, the integration could also encourage users of Snapchat to use Twitter. This is because they will be exposed to more content firsthand.
In its third-quarter fiscal posted in October, Twitter showed signs of steady growth. It reported a 14% increase in total revenue year-over-year. It also reported a rise in revenue across the board in the same period. The company’s advertising revenue rose by 15% while U.S. and international revenue saw gains of 10% and 18% respectively.
Above all, the key highlight investors may be looking at is the company’s average monetizable daily active usage (mDAU). This metric essentially measures how many users are viewing ads regularly. Investors would be glad to know that the metric rose by 29% compared to the same quarter last year. All of this bodes well for Twitter, which some observers consider a laggard among social media stocks. The question is, will these developments be enough for you to add TWTR stock to your portfolio?
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To top it all off, we have Pinterest (PINS Stock Report). Pinterest is a social media platform that primarily focuses on image sharing. It allows users to explore ideas and designs in the form of pictures on the internet. A key feature of its design is that users can save these designs on digital pinboards for them to get back to at a later time. This is good for users looking to brainstorm ideas for just about anything. Considering the tons of people stuck at home with plenty of ideas, it is easy to see why it has exploded in popularity this year.
We can see proof of this, in its third-quarter fiscal posted late October. Pinterest saw a 58% jump in revenue from the same quarter last year. It also reported a 37% gain in global monthly active users in the same period. CFO Todd Morgenfeld had this to say about the company’s success, “We’re extremely pleased with the broad-based strength of our business, driven by recovering advertiser demand as well as positive returns from our investments in advertiser products and international expansion,” Pinterest also provided modest guidance of a 60% year-over-year growth in revenue for the coming quarter. Despite the impacts of the pandemic, the company appears to be pressing on with great results.
In the same fashion, the company recently added several features to its app. These include being able to leave private notes regarding pinboards and being able to sort boards based on preferred content. These additions would serve to improve user experience and in turn, user retention. As people continue to plan their post-pandemic life on Pinterest, could PINS stock continue to flourish? I’ll leave that up to you to decide.
