As of late, social media has really been booming. Most people have heard about Facebook ( FB ), Twitter ( TWTR ), and LinkedIn ( LNKD ), and they may have a profile on just one of them, or even all of them. We have all heard the debate regarding which is the best social media platform for a while, however, few of us have actually thought about which one is the better investment, for both long and short term investors.
Let's take a look at these three giants of the space and drill down to find which company might be the best pick for investor portfolios right now:
Twitter is a social media platform, and it has been publicly traded for almost a year now. It has shown some very good potential to grow, especially since it is generally a bullish market now, considering how geopolitical tensions in Eastern Europe are winding down. We would suggest to everyone who is willing to invest in social media in stocks to keep TWTR in mind.
Sitting at around $45 price, many still believe it is a good entry point, considering how the highest price point was around $75. The reason TWTR dropped in price almost in half was due to the fact that TWTR employees who owned stock were reluctant to hold on to the stock for long, and they ended up dumping shares, which caused the price to plummet to an all time low, even below the company's IPO price.
Another reason as to why TWTR may be an interesting pick is because social media is slowly taking over search engines, and businesses are diversifying how they promote themselves and reach out to target customers. Google accounted for just over 37% of traffic to websites in December 2013, and that amount fell to 31.04% in May. This is also logically the same case with other search engines such as Yahoo!, Bing, and AOL.
Furthermore, another key reason as to why TWTR is expected to rise is due to recent acquisitions of SnappyTV. This acquisition is expected to help Twitter provide videos of real-time events to users , and could help increase Twitter's standing as a go-to source for breaking news and events.
While expectations remain high for TWTR, recent trading suggests it is now on the right path. We saw how TWTR's stock price jumped after the company crushed its most recent estimates. According to Street Insider, Cantor Fitzgerald reiterated a "Buy" rating on TWTR, with a price target of $58/share, while analyst Youssef Squali also noted positive momentum for TWTR in the previous month of July, thanks to unique visitors growing by 3.9%. The average TWTR user spent about 89.30 minutes on TWTR in July, which was a decrease from June's activity by about 2.8%.
Despite this reasonable growth, most analysts and investors do not expect TWTR to catch up to FB's user engagement, but TWTR will have to consistently grow and keep the momentum growing if it wants to succeed and thrive in the market.
TWTR is currently a Zacks Rank #3 (Hold), and has an EPS growth of 23.33% from last year. While TWTR is still losing money, it did crush the estimates nonetheless, helping the stock to soar in after hours, which continued well into the next trading day.
TWTR managed to make $312.17 million in total sales the previous quarter, and maintained a net loss last quarter roughly -$144.64 million. TWTR had a total of 595.61 million average shares, and a diluted net EPS of -$0.24/share. TWTR surprised estimates last quarter by 17.86%, but EPS estimates have been revised and decreased from -$0.26/share to -$0.27/share.
Facebook, which became available to the public in 2004, has become a digital icon, and Mark Zuckerberg has ensured it stays on top of its game and king of the industry. Everyone is at least somewhat familiar with the social media site and it is estimated that 20% of the globe's population is on Facebook.
In other words, there are approximately 1.28 billion users on Facebook, which is about a 15% increase year/year. As of June 2014, FB retained 802 million daily users, or those who log onto FB daily. Per Street Insider, FB's unique users in July increased by 1.3%, and the average FB user spend 38.10 minutes/day on the site, which translates to a 4.5% increase from June's statistic.
There is no doubt that Facebook's reign as king is still in the beginning stages. It has been nominated by some to be the next Google ( GOOGL ), but faces stiff competition from giant e-commerce retailer, Amazon Inc. ( AMZN ), a company that many also believe could fill that role.
Facebook's Mark Zuckerberg has also been on an acquisition spree, the most famous of which was the WhatsApp purchase for $16 billion cash earlier in the year. There have been a host of other purchases and many believe that these acquisitions, if integrated correctly, could help keep FB in a dominant position.
Many traders and investors argue that FB is also a great growth stock, as it holds the potential to continue growing at a solid clip, especially after seeing how the social media king crushed estimates. FB saw EPS increase by about 957.1% from last year, while an analyst Cantor Fitzgerald also reiterated a price tag of $82/share for FB.
FB holds a Zacks Rank #2 (Buy) and has been looking very positive from its previous conference call. FB managed to make $2.910 billion in sales last quarter, with a whopping net income of $791.00 million. FB had 2,615 million average shares, and had a diluted net EPS of $0.30/share.
FB surprised positively and beat the Zacks Consensus EPS estimate last quarter by 15.38%, and shares climbed after the earnings report. It is also worth mentioning how EPS expectations have been revised and increased in the past month suggesting more growth could be ahead.
LinkedIn Corporation is a social media platform that is mostly directed towards business professionals. It is a social networking service that was founded in December 2002, but was launched on May 5, 2003. LinkedIn has been a solid investment as it has performed well over the past, and it has grown considerably with college students and high school students, who are seeking to better their employability.
Many claim that one of the very first elements that employers look for is the interviewee's LinkedIn profile, and how organized and connected it is. LNKD also has plenty of room to grow, something that FB cannot say at this time. This could make LNKD a better growth stock, unless FB becomes more innovative and aggressive in other areas other than earning most of its revenue from advertisements.
LinkedIn's performance last quarter was quiet unimpressive to say the very least, but it may be time for a good buying opportunity for long term investors. LNKD has highlighted serious growth and potential to move higher. LNKD is currently a Zacks Rank #2 (Buy), and the Zacks Consensus Estimate Trend is positive, as analysts revised and increased EPS estimates from a one cent per share loss to $0.05/share in the past few weeks for the current quarter time frame. LNKD reported $1,529 million in sales last quarter, but a meager $27 million net income, so it definitely has some work to do on the profitability front.
Overall, TWTR, FB, LNKD are all solid stocks to invest in, as social media as a whole is very promising, and carries a lot of potential with it not only due to the reasons mentioned above, but most importantly due to the fact that these stocks are on everyone's radar. Many are excited to see where FB is going, and whether the company will be able to successfully integrate its many acquisitions. We believe, and the recent earnings estimate trend backs us up on this, that FB remains a better stock for investors to put their money in, when compared to TWTR.
Meanwhile, despite LNKD's huge potential, we would still be very cautious when the company conducts its conference call, as they have missed in the majority of the past four quarters, and don't have a great track record of beating estimates (on a BNRI basis). We would say FB is the clear winner from this comparison, with TWTR trailing behind, while the one with the most potential would be LNKD, but more so for those who want to take a gamble over the longer term.