There’s no question that social media is booming and is here to stay. In fact, social media has taken on new relevance with the arrival of the coronavirus pandemic. More than ever before, people have needed social media in 2020 and 2021 to stay in touch, for both personal and business reasons. When the virus finally recedes from daily life, social media will remain an important force keeping people together.
So how can you, as an investor, cash in on this long-term trend? The easiest way is to buy the social media properties that trade on the public stock exchanges. You might be surprised to learn that some of the most well-known names in the social media world, such as Facebook, actually own a number of different companies in the space, as they tend to buy the up-and-coming properties that look like winners. So, in buying one well-known name, you’ll often own other social media properties as well.
As with all investments, consult with a financial advisor to make sure your choices are in line with your investment objectives and risk tolerance before you commit any money. Here’s a look at some of the top social media sites that are worth investment.
Facebook is by far the most dominant social media site in the world. But Facebook the company also owns a number of the other largest sites in the world, including WhatsApp and Instagram. In fact, Facebook, WhatsApp, Facebook Messenger and Instagram, all Facebook-owned properties, were the first, third, fourth and sixth most-popular social networks worldwide as of October 2020. Each of those properties has over 1 billion active monthly users, with Facebook exceeding 2.7 billion — that’s billion with a B! The bottom line is that if you want exposure to social media, Facebook is the 900-pound gorilla in the room. Over the past five years, Facebook stock has generated returns exceeding 21% annually.
Microsoft may not be the first name you think of when you’re looking for social media properties, but in addition to all of its other divisions, tech giant Microsoft also owns one of the most-used business sites in the world, LinkedIn. As of the third quarter of 2020, LinkedIn had 722 million users, with over 27% of Americans using the site in 2019. These numbers seem likely to grow as more and more connections are made on the network.
But the beauty of investing in Microsoft extends much further than owning a piece of LinkedIn. The formerly stodgy distributor of Windows software has recently expanded into two of the fastest-growing industries in tech, cloud computing and autonomous vehicles. In addition to posting huge sales and earnings growth in its cloud division, Microsoft recently signed an agreement to provide software for General Motors’ self-driving car division. Combined with its social media exposure, Microsoft seems to be firing on all cylinders.
Snap is the parent company of Snapchat, another of the most popular social media sites. Fears over the competition with the likes of WhatsApp, Instagram and TikTok have helped make the stock quite volatile, but those who hung on for the ride in 2020 were amply rewarded, with the stock price more than tripling. In 2021, the volatility is likely to continue, but if the company’s business metrics continue on the same trend, there could be further gains ahead for Snap. Revenues and daily users continue to rise, and Snap’s losses continue to shrink, all of which bode well for future stock gains. However, there’s no doubt that the stock is pricey by traditional metrics such as price to sales, so be sure to strap on your seat belt if you’re making an investment in Snap.
Match Group (MTCH)
Match Group, which also owns the dating app Tinder, is another social media site that could have a bright future. Even in the midst of the coronavirus pandemic in 2020, Match Group stock rose 83%, but greater things could be in store in 2021 and beyond. Match Group is poised to be a beneficiary of the reopening of businesses and economies once the coronavirus subsides, as the whole purpose of the company is to get people to meet. When bars, restaurants, movie theaters and concert venues reopen, it’s inevitable that more people will be meeting up; apps like Match and Tinder, which are designed to help people make connections, should thrive.
Match Group isn’t sitting on its laurels, either. The company plans to unveil new products in 2021, including Tinder Platinum, live video and Swipe Night, and these could boost the company’s revenue even more than the 19% that Wall Street is currently expecting, according to Jeffries analyst Brent Thrill.
Up & Coming: TikTok (ByteDance)
TikTok may be all the rage across the globe, but as of yet, you can’t buy the stock in the public markets. Owned by parent company ByteDance, TikTok allows users to create short videos with various animations and special effects, typically while singing or dancing. But TikTok is so much more than it sounds. According to Nielsen, “No emerging app helped break more songs in 2019 than TikTok,” and its global audience of 500 million monthly users is only growing. TikTok’s parent company, ByteDance, is already the world’s most valuable startup, with a valuation of about $180 billion. The good news for investors is that although TikTok/ByteDance shares are not yet available, they are expected to IPO on a U.S. exchange sometime in the next year.
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