Over the past decade, social media has become increasingly influential in our daily lives, shaping how we connect, communicate, and consume content. Despite its rapid growth, the industry shows no signs of slowing down, proving that this digital phenomenon is far from over.

Given this landscape, it could be wise for investors to scoop up shares of fundamentally strong companies such as Meta Platforms, Inc. (META), Spotify Technology S.A. (SPOT), and Pinterest, Inc. (PINS), which are well-positioned to monetize their massive user bases.

Globally, the number of social media users grew by 320 million year-over-year, reaching 5.04 billion. As more people come online, this number is expected to rise significantly, with the global social media market projected to hit $413.16 billion by 2028, growing at a CAGR of 13.2%. The core revenue driver for these platforms remains advertising, fueled by massive user engagement and sophisticated algorithms.

However, social media companies aren’t just relying on advertising anymore; they’re diversifying their revenue streams. Premium features, ad-free experience, exclusive content, and integrated shopping options are just a few of the innovative monetization strategies being explored.

Therefore, the evolving social media market offers investors an attractive opportunity as these platforms continue to innovate, leveraging cutting-edge technologies like AI to grow and enhance profitability.

With that in mind, let’s examine the fundamentals of the above-mentioned stocks in detail:

Meta Platforms, Inc. (META)

META develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. With a market cap of $1.32 trillion, the company operates through Family of Apps (FoA) and Reality Labs (RL) segments. 

On July 29, META introduced the Segment Anything Model 2 (SAM 2), the first unified model that identifies which pixels belong to a target object in an image or video. It can segment any object and consistently follow it across all video frames in real-time, unlocking new possibilities for video editing and mixed-reality experiences.

This innovative technology positions META at the forefront of video editing and mixed reality, potentially driving new revenue streams and attracting developers to its platform.

For the second quarter of 2024, which ended on June 30, META’s revenue increased 22.1% year-over-year to $39.07 billion. Its income from operations grew 58.1% from its year-ago value to $14.85 billion. The company’s net income for the quarter amounted to $13.47 billion or $5.16 per share, representing an increase of 72.9% and 73.2%, respectively, from the same period last year. Moreover, the number of daily active family people (DAP) increased by 7% year-over-year to an average of 3.27 billion.

For the fiscal third quarter of 2024, META’s revenue is expected to range between $38.5 billion and $41 billion, while expenses for the full year are anticipated to fall between $96 billion and $99 billion.

The consensus revenue estimate of $40.11 billion for the fiscal third quarter (ending September 2024) represents a 17.5% increase year-over-year. The consensus EPS estimate of $5.23 for the same quarter indicates a 19.1% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Over the past year, the stock has surged 78%, closing the last trading session at $516.78.

META’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

META has an A grade for Sentiment and Quality. It is ranked #15 out of 51 stocks in the B-rated Internet industry. Click here to see the additional ratings for META (Growth, Value, Momentum, and Stability).

Spotify Technology S.A. (SPOT)

Headquartered in Luxembourg, SPOT is a platform for audio streaming subscription services. It enables users to discover new releases, including the latest singles, albums, and playlists, which include ready-made playlists by music fans and experts, and build a personalized collection. The company operates through two segments, Premium and Ad-Supported. 

On July 17, SPOT introduced an AI DJ In Spanish, offering listeners a new way to connect with and discover music on Spotify. The personalized AI guide understands the listener’s musical tastes to curate the perfect playlist.

This feature enhances engagement and retention by catering to Spanish-speaking users, providing SPOT more opportunities to monetize its user base through targeted ads and premium subscriptions.

SPOT’s latest quarterly report highlighted that it integrated over 250,000 audiobook titles into Premium subscriptions across Canada, Ireland, and New Zealand, adding value to its user base in these regions. To cater to diverse preferences, SPOT rolled out the Basic plan in Australia, the UK, and the US, providing eligible users with an ad-free music experience without audiobook access.

Furthermore, the company launched Creative Lab, an innovative in-house ad creative agency, and Quick Audio, a cutting-edge generative AI tool designed to empower advertisers.

During the second quarter that ended on June 30, 2024, SPOT’s revenue increased 19.8% year-over-year to €3.81 million ($4.25 billion). The company’s gross profit came in at €1.11 billion ($1.24 billion), reflecting an increase of 45.2% from the prior year. In addition, its net income for the quarter amounted to €274 million ($306.14 million), compared to a loss of €241 million ($269.27 million) from the same period last year, while its EPS stood at €1.33, versus a loss of €1.55 per share last year.

Also, the company’s total monthly active users (MAUs) and premium subscribers grew by 13.6% and 11.8% from the prior period to 626 million and 246 million, respectively.

Looking ahead, SPOT forecasts its total revenue and operating income for the third quarter (ending September 2024) to be €4.00 billion ($4.46 billion) and €405 million ($452.39 million), respectively. The company expects an increase of 5 million net new subscribers, amounting to 251 million total premium subscribers.

Analysts expect SPOT’s revenue for the third quarter (ending September 2024) to grow 25.9% year-over-year to $4.48 billion, while its EPS for the same period is expected to increase significantly from the previous year to $1.98.

SPOT shares have surged 84.8% over the past nine months to close the last trading session at $337.56.

SPOT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Growth and a B for Sentiment and Stability. Within the Entertainment – Radio industry, it is ranked first out of 5 stocks. Click here to see SPOT’s ratings for Value, Momentum, and Stability.

Pinterest, Inc. (PINS)

PINS is a global visual search and discovery platform. Its platform allows people to find ideas, such as recipes, home and style inspiration, and others, and search, save, and shop for ideas. The company’s primary service, Pinterest, can be accessed through its mobile application or the Web.

On June 13, PINS and Integral Ad Science (IAS), a leading global media measurement and optimization platform, entered into a partnership to provide global advertisers with greater transparency into campaigns across PINS’ in-app feed through IAS’ AI-driven Total Media Quality (TMQ) Brand Safety and Suitability product.

PINS’ revenue for the second quarter (ended June 30, 2024) increased 20.6% year-over-year to $853.68 million. The company reported an adjusted EBITDA of $179.91 million, indicating a 68.1% growth from the prior year quarter. PINS’ 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. In addition, its global Monthly Active Users (MAUs) increased 12% year-over-year to 552 million.

According to the guidance, PINS forecasts third-quarter revenue to range from $885 million to $900 million, reflecting 16% to 18% growth year-over-year.

Street expects PINS’ revenue for the fiscal third quarter (ending September 2024) to increase 17.4% year-over-year to $895.90 million. Its EPS for the same period is expected to register a 22.1% growth from the prior year, settling at $0.34. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.

The stock has gained 15.3% over the past year to close the last trading session at $31.27.

PINS’ mixed fundamentals are reflected in its POWR Ratings. The stock has an A grade for Growth and a B for Quality. It is ranked #20 out of 51 stocks in the Internet industry.

Beyond what is stated above, we’ve also rated PINS for Value, Momentum, Stability, and Sentiment. Get all PINS ratings here.

What To Do Next?

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META shares . Year-to-date, META has gained 46.30%, versus a 18.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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