Social media stocks have had plenty of activity in the past couple of months. Reddit (NYSE:RDDT) went public to much fanfare, while former President Trump’s controversial Trump Media & Technology Group (NASDAQ:DJT) finally completed its merger with special purpose acquisition company Digital World Acquisition Corp. Moreover, we recently saw the leading social media giants dish out another solid quarter of growth across both lines. Hence, it’s tough to remove social stocks to buy out of the equation.
Though the conversation has centered around artificial intelligence (AI) over the past year, the truth is that even without it, social media sites remain incredibly profitable investments. AI will lead to greater engagement and time spent on top social media platforms. More time spent means more opportunities for social media companies to milk more from their user base. With that thought, here are three social media stocks that stand head and shoulders above the rest.
Meta Platforms (META)
No social media stocks to buy list is complete without Meta Platforms (NASDAQ:META). It’s behind some of the biggest social media platforms of all time, effectively shaping the modern social media landscape. Its family of apps, including Facebook, Instagram, WhatsApp and Messenger, collectively boast an eye-popping user base of 3.98 billion.
Last year was massive for Meta’s business and stock. Meta made impressive inroads on the AI front while streamlining its operations to cut costs. The results were staggering, resulting in more than a 50% increase in free cash flow and top- and bottom-line beats in each of the four quarters.
It recently posted impressive first-quarter (Q1) earnings results, blowing past analyst estimates across both lines. Its revenues increased roughly 27% to $36.46 billion, beating estimates by $231.9 million. Moreover, its earnings per share (EPS) of $4.71, beat estimates by 35 cents. However, its stock nosedived following the release of cautious forward guidance. The market has this wrong, making it an excellent time to scoop up the stock on the dip.
Pinterest (PINS)
The image-based social media platform Pinterest (NYSE:PINS) is on fire right now. Following its Q1 earnings print, the stock jumped by double digits, which crushed estimates across both lines. Moreover, it surpassed $500 million monthly users, a record-high for the business.
Pinterest’s Q1 revenues demonstrated a robust growth of 23%, reaching an impressive $740 million. This surpassed analyst estimates by a substantial $40 million. Furthermore, the company’s strategic cost reduction of 6% led to a significant decrease in its operating loss, from $ 243.7 million to $54.4 million. The average revenue-per-user (ARPU) also saw a healthy increase of 10% globally, reflecting the platform’s strong performance across all regions.
These spectacular results were reminiscent of Pinterest’s peak popularity during the pandemic years. In fact, according to CEO Bill Ready, its Q1 results showed the “fastest user and revenue growth since 2021”.
PINS stock skyrocketed last year, growing almost 90%, and is up 16% this month despite the pullback in the broader market. Despite the eye-catching gains, analysts expect a 6% upside from current prices based on average price targets.
Tencent Holdings (TCEHY)
Tencent Holdings (OTCMKTS:TCEHY) is one of the leading Chinese social media players, leveraging the power of its robust super-app WeChat. With a whopping 1.3 billion monthly active users, WeChat has its tentacles spread across various tech verticals, including fintech, gaming, telehealth and now AI. The evolution of the app has allowed Tencent to enhance user engagement across its platform effectively. Moreover, despite the looming threat of regulatory oversight, the company has played it safe, effectively minimizing the risk of disruptive penalties from the Chinese government.
Recent operating results have been marred by headwinds in the Chinese market, but the firm has done well in maintaining decent growth while maintaining its profitability positioning. Moreover, it unveiled its dynamic Hunyuan AI model, which could potentially be a major growth catalyst for the firm down the road.
TCEHY stock was relatively muted compared to other tech players in 2023 but has made up for lost ground this year. The stock is up roughly 25% year-to-date (YTD), with more upside potential ahead.
On the date of publication, Muslim Farooque 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.