The 2010s can reasonably be called the social media decade—at least as far as investors are concerned. While the 2000s saw the launch of Facebook, Twitter, and dozens of other sites, most of the companies behind these sites only went public within the last ten years. Nowadays, social media stocks are almost as addictive as the apps themselves.
Recently, a number of the biggest online media companies released their third-quarter earnings reports. Along with these reports, they provided investors and market watchers with an idea of what to expect in the coming quarter and the year beyond.
Let’s examine these reports to get an idea of which social media stocks will enter the next decade with momentum, and which ones might be going the way of MySpace before too long.
Social Media Stocks Doing Well: Facebook Rose 9% in October
Facebook (NASDAQ:FB) claims to have about 2.8 billion active monthly users as of its third quarter, which is up 35 million from Q2. From these users, the company generated approximately $16.89 billion in revenue, which equates to just over $6.00 per user.
Earnings per share came out to $2.12 on net income of $6.1 billion. This figure beat analyst estimates by $0.21 and represents 20.2% year-over-year growth.
Facebook Chief Financial Officer Dave Wehner expects sales growth to slow in Q4 by a mid-to-high single-figure percentage point. Analysts expect the company’s Q4 revenue to grow 24%, which would represent a slowdown of 5%.
Next year, the company forecasts $54 billion to $59 billion in total expenses. Capital expenditures will be $17 billion or $18 billion, driven by “investments in data centers, servers, office facilities and our network infrastructure,” said Wehner.
Social Media Stocks Doing Poorly: Twitter Fell 25% in October
On the other side of the coin, Twitter Inc (NYSE:TWTR) stock plummeted on its third-quarter earnings report.
The site has 145 million monetizable daily active users and generated $823.7 million in revenue from them. This fell below analyst expectations of $874.0 million. As a result, earnings per share also missed expectations by three cents, coming in at $0.17.
Twitter cited platform bugs and advertising “headwinds” as the reason for its poor performance. One bug saw the social media platform collect user data even when the users answered “no” to a prompt asking for permission. As Twitter shut this feature down, the site is currently struggling to target and sell ads, something that Facebook still does better than anyone else.
Having lost all of its 2019 gains, Twitter is now the center of takeover rumors that may indicate what’s in store for it next year.
Social Media Stocks Hanging in There: Pinterest Down 5% in October (But Up 3% Since Its IPO)
Pinterest Inc (NYSE:PINS) is the newest social media company to enter the stock market. It IPO’d in April at $24.40 and quickly showed promise by gaining 40% by the end of that month.
Since then, PINS shares have struggled somewhat but never dipped down to embarrassing lows. The company reported earnings per share of $0.01, which may not seem like a lot, but is still better than the $0.04 loss that analysts were expecting.
Pinterest generated $279.9 million in Q3 from 322 million active monthly users, meaning it earned $0.90 per user. All three figures came just a hair’s breadth below estimates.
While much smaller than its rivals, Pinterest is growing at a faster rate and picking up some market share. Sales grew 47% year-over-year, topping Facebook’s 28% ad sales growth and trouncing Twitter’s numbers.
The company expects to post a loss in 2019 of $10–$30 million. It still has investments to make in its platform before it can become a titan of the industry, but it seems to be on track to do just that sometime in the coming decade.
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