The increasing penetration of mobile, tablet and other electronics and the embrace of remote lifestyles during the COVID-19 pandemic are continuing to drive the social media market. Consequently, the global social media market is estimated to grow at a 32% CAGR between 2020 – 2025 to hit $308.96 billion.
According to a recent survey, on average Americans spend 2 hours and 7 minutes daily on social media. In response to this, businesses are increasing their budgets for social media marketing and advertising to secure the attention of the huge user base on these platforms. This is driving solid ad revenues for the social media companies. Consequently, the industry is enjoying favorable investor sentiment, as evidenced by the Global X Social Media ETF’s (SOCL) 77.9% returns over the past year versus the SPDR S&P 500 Trust ETF’s (SPY) 38.1% gains.
Given this backdrop, Wall Street analysts expect the shares of financially-strong social media companies Snap Inc. (SNAP), Twitter, Inc. (TWTR), and Bumble Inc. (BMBL) to witness a strong rally in the near term.
Snap Inc. (SNAP)
SNAP is a new kind of camera app that is used by millions of people every day to stay in touch with friends. The company offers Snapchat, a camera application with functionalities, such as a camera, communications, Snap Map, stories, and spotlight that enable people to communicate through short videos and images. It also operates through brands that include Spectacles and Bitmoji.
This month, SNAP revealed new partnerships with Disney and Bumble and other tools across its Snap Kit, Games, Minis and Bitmoji platforms. It also introduced Map Layers, a new way for partners to bring their services to Snap Map. This should enhance its products, extend its reach, and grow its businesses.
SNAP’s net revenue grew by 66.4% year-over-year to $769.58 million in the first quarter, ended March 31, 2021. The company’s cash from operating activities increased 2079.8% year-over-year to $136.89 million, while its free cash flow increased to $126.04 million. It reported $2.55 million in non-GAAP net income during the quarter.
Analysts expect SNAP’s revenue to increase 92.4% year-over-year to $844.63 million in the current quarter, ending June 2021. The company’s EPS is expected to increase 466.7% year-over-year to $0.22 in the current year. The stock has gained 259.2% over the past year.
Of the 27 analysts that have rated the stock, 20 have rated it a Buy. Closing yesterday’s trading session at $61.07, the $77.71 average analyst price target represents a 27.3% potential upside.
Twitter, Inc. (TWTR)
TWTR is an open service that serves as a forum for the expression of different perspectives, ideas and information. It also provides promoted products and services, such as promoted tweets, promoted accounts, and promoted trends, which enable its advertisers to promote their brands, products, and services. In addition, the company has advertisement offerings such as MoPub and the Twitter Audience platform that enable advertisers to extend advertising campaigns.
In March, Twitter attained global brand safety through the Trustworthy Accountability Group (TAG), which is a leading global certification program that fights unacceptable activity in the digital world. This should provide advertisers with more control over the conversations they start on Twitter and ultimately increase engagement on the platform.
In its fiscal first quarter, ended March 31, TWTR’s revenue increased 28.3% year-over-year to $1.04 billion. The company reported a $52.18 million year-over-year increase in its income from operations, while its net income increased year-over-year to $68 million. It reported an EPS of $0.08 during the quarter, compared to a $0.01 loss per share in the prior-year quarter.
Analysts expected TWTR’s EPS to increase 189.7% year-over-year in the current year to $0.78. Its revenue is expected to increase 51% year-over-year to $1.17 billion in next quarter, ending September 2021. The stock has gained 75.6% over the past year.
A $68.04 consensus price target represents a potential 17.25 upside from its last closing price of $58.08.
Bumble Inc. (BMBL)
Founded by CEO Whitney Wolfe Herd in 2014, BMBL is one of the first dating apps built with women at its core. It is the parent company of Badoo and Bumble, two of the world’s highest-grossing dating apps with millions of users worldwide. It empowers users to engage in dating, networking, or meeting friends online. BMBL currently employs more than 700 people in offices in Austin, Tex., Barcelona, London, and Moscow.
In February, BMBL made its stock market debut with a $2.2 billion IPO. It priced 50,000,000 shares of its Class A common stock at $43.00 per share.
BMBL’s revenue increased 115.7% year-over-year to $170.71 million in the first quarter, ended March 31, 2021. Its net earnings increased year-over-year during the quarter and came in at $323.44 million. It reported $246 million in cash and cash equivalents, representing a 103.8% increase from its year-ago value. The company EPS per share was $1.69, compared to a $0.02 loss per share in the prior-year quarter.
The company’s EPS is expected to increase 3460% year-over-year to $1.68 in the current year, while its revenue is expected to increase 34.9% year-over-year to $731.48 million in the same period.
Closing yesterday’s trading session at $45.98, BMBL’s $62.69 average price target represents a potential 36.3% upside.
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SNAP shares were trading at $61.60 per share on Friday morning, up $0.53 (+0.87%). Year-to-date, SNAP has gained 23.03%, versus a 12.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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