Is It Time To Invest In Social Media?

Social media companies are having a moment, as Snap’s stock skyrockets after its Q3 earnings report, now other media platforms are jumping aboard for the ride.

Oct. 26, 2020

A lot is going on in the social media world right now as Facebook (NASDAQ: FB) and Pinterest’s (NYSE: PINS) shares both moved higher this week after Snap (NYSE: SNAP) revealed its earnings report for Q3. The three companies were affected by a resurgence in brand advertising, boycotts of leading online advertisement company Facebook, a new dating app, and Snap’s launch of new advertising inventory. After months of struggling with declines in advertisement revenue, social media companies may be seeing some light at the end of the tunnel as the consensus from investors is that advertisers are switching to digital platforms with stronger user engagement.

Snap Hits Back 

Snap’s stock soared 37% last Wednesday following its earnings report, pushing its market value to $57 billion. Revenue shot up 52% year-on-year to $679 million. The Snapchat owner’s audience reached 249 million active users in the last three months, benefiting from the global lockdowns. 

Snap announced that it is seeing positive momentum in the online advertising industry again, especially in brand advertising which was previously struggling. The company owed some of its successes this quarter to companies looking for ‘platforms who share their corporate values’, which many believe was a reference towards Facebook’s handling of hateful content lately. During the pandemic, Snap worked with brands to help customers virtually try on clothes as they shopped from home using Snap’s augmented reality tools as virtual dressing rooms. 

Facebook Dating 

Social distance living has been very hard for singletons. Enter ‘Facebook Dating’. Facebook launched its very own dating service across Europe, sending its shares up by almost 5% last Wednesday following the announcement. Facebook’s shares were also partially affected by Snap’s blowout earnings which drove social media optimism for investors. 

Mark Zuckerberg’s new dating service, and its 1.5 billion matches in 20 countries, will take on the likes of Match Group and Hinge. Facebook Dating’s advantages include the fact that users can share stories from their normal Facebook and Instagram accounts to their dating profile, as well as a ‘Secret Crush’ feature, which allows singletons to select nine crushes from their friends/follower list from the two apps. This is a clever remake of the usual swiping/match style that every other dating app uses to connect people. However, as Facebook is already facing scrutiny over its handling of users’ private information, do we really trust him with our dating data too?

Pinterest Stock is Upgraded 

Pinterest shares jumped 15% on Wednesday as Goldman Sachs and Bank of America upgraded the visual discovery engine to buy from neutral. Bank of America set its share price at $58 whilst Goldman Sachs slapped a $61 per share price target on Pinterest stock. 

At the beginning of the year, the pandemic affected Pinterest’s business as many companies closed and others limited the amount they spent on advertising. With more businesses reopening, Pinterest should be able to increase its revenue as organizations pump more money into advertising again. Nevertheless, the stay-at-home restrictions did result in 39% more active users on the app. In Q2 of this year, revenue was also up 4% to $272 million, beating Wall Street’s, admittedly low, expectations of $255 million. Pinterest is a very popular tool during the Christmas period as viewers turn to it for inspiration on everything from present ideas to festive decoration. With its Q3 earnings report this week, the social media app is on track for a strong year. 

Whether it be finding your future partner on Facebook, using Snapchat filters, or searching for the perfect home inspiration on Pinterest — most of us are using social media every day. The pandemic has represented challenges and new opportunities for media platforms; the innovative ideas these social media giants have used to overcome these obstacles could result in further stock increases.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in the companies mentioned above. Read our full disclosure policy here.