The internet sector is booming, with social media trends driving massive traffic, influencer-led brand growth, and integrated shopping features. As social media continues to grow, investing in social media stocks with strong long-term potential, such as Pinterest, Inc. (PINS - Get Rating) and Meta Platforms, Inc. (META - Get Rating) could be a smart move now.

Social media is emerging as a leading tool for instant customer service, with AI-powered content creation enhancing efficiency and boosting engagement. These innovations are reshaping how businesses and consumers interact online, transforming the overall internet experience. Hence, the global internet service market is expected to reach $766.08 billion by 2032, growing at a 4.4% CAGR.

Moreover, the future of social media looks promising, driven by rapid innovations in social commerce integration, AR technology, and the rise of platforms. The influencer landscape is evolving, supported by internet expansion and faster connectivity in new regions. The social media market is projected to grow to $413.16 million by 2028, with a CAGR of 13.2%.

Considering these conducive trends, let’s look at the fundamentals of the two above-mentioned Internet stocks, beginning with number two.

Stock #2: Pinterest, Inc. (PINS - Get Rating)

PINS operates as a visual search and discovery platform internationally. Its platform allows people to find ideas, such as recipes, home and style inspiration, and others; and to search, save, and shop for the ideas.

In terms of its trailing-12-month Return on Total Assets, PINS’ 5.12% is 310.5% higher than the 1.25% industry average. Likewise, its 23.34% trailing-12-month levered FCF margin is 192.6% higher than the 7.98% industry average. Furthermore, the stock’s 0.96x trailing-12-month asset turnover ratio is 93.6% higher than the 0.50x industry average.

During the second quarter ended June 30, 2024, PINS’ revenue increased 20.6% year-over-year to $853.68 million. Its non-GAAP net income came in at $207.16 million and $0.29 per share, up 45.8% and 38.1% year-over-year, respectively. Furthermore, the company’s adjusted EBITDA rose 68.1% over the prior-year quarter to $179.91 million.

For the quarter ending September 30, 2024, PINS’ EPS and revenue are expected to increase 22.9% and 17.4% year-over-year to $0.34 and $895.88 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, PIN’s stock has gained 13.4% to close the last trading session at $30.55.

PINS’ bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Growth and a B for Quality. It is ranked #19 out of 53 stocks in the B-rated Internet industry. To access the additional grades of PINS for Value, Momentum, Stability, and Sentiment, click here.

Stock #1: Meta Platforms, Inc. (META - Get Rating)

META engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs.

In terms of the trailing-12-month EBIT margin, META’s 41.21% is 354.5% higher than the 9.07% industry average. Its 34.34% trailing-12-month net income margin is considerably higher than the 3% industry average. Likewise, the stock’s 19.28% trailing-12-month Capex / Sales is 448.9% higher than the 3.51% industry average.

META’s revenue for the second quarter ended June 30, 2024, increased 22.1% year-over-year to $39.07 billion. Its income from operations grew 58.1% from the previous year’s quarter to $14.85 billion. For the same period, the company’s net income amounted to $13.47 billion, or $5.16 per share, up 72.9% and 73.2%, respectively, over the prior-year quarter.

Street expects META’s EPS and revenue for the quarter ending September 30, 2024, to increase 19.9% and 17.6% year-over-year to $5.26 and $40.17 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 62.5% to close the last trading session at $567.45.

META’s POWR Ratings reflect a solid outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.

It is ranked #17 in the Internet industry. It has an A grade for Sentiment and Quality. Click here to see META’s Growth, Value, Momentum, and Stability ratings.

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META shares were trading at $564.57 per share on Monday afternoon, up $3.22 (+0.57%). Year-to-date, META has gained 59.98%, versus a 20.50% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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