3 Fast-Rising Social Media Stocks to Buy Now

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Social media has never been more prominent. The president of the United States’ favorite platform is Twitter and he issued an executive order to ban the use of Chinese-owned short-video sharing app TikTok in the U.S. Facebook is richer and more polarizing than ever, especially as the election approaches. “The Social Dilemma,” a critically acclaimed documentary about the nefarious intentions of the big social media companies, is one of the most-watched movies on Netflix right now. So it’s no wonder that social media stocks are faring well.

But did you know just how well they’re doing this year?

The Global X Social Media ETF (SOCL), whose holdings include the top social media stocks from around the world (namely in the U.S. and China), is up 42% this year, versus a 24% run-up in the tech-heavy Nasdaq. Going back even further, SOCL is up 62% in the last two years, versus a 45% jump in the Nasdaq. In the last five years, the outperformance of social media stocks compared to their index is 175% to 140%. So this is not a new phenomenon.

However, this year’s outperformance has been far more pronounced. And it could continue that way in the coming years as social media continues to take over the world – for better or worse.

Here are three social media stocks that have impressed the most so far in 2020:

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Social Media Stock #1: Snap Inc. (SNAP)

2020 Gains: 62%

Remember Snap Inc.? It’s the company that owns Snapchat, the app that allows you to show photos and videos that “disappear” after a short period of time. SNAP stock came public to much fanfare in February 2017 before completely melting down in the wake of this overhyped IPO, falling from 27 to 11 a share in its first six months of trading. Now, for the first time, SNAP is approaching its IPO closing-day price, reaching 26.8 after rising nearly 170% since March.

With accelerating sales growth (+27% expected this year, +38% expected in 2021) and improvement on the bottom line, Snap Inc. finally looks stable. And the chart is impressive…

Snap Inc. (SNAP) is one of the top social media stocks today.Social Media Stock #2: Pinterest (PINS)

2020 Gains: 138%

Pinterest is a favorite of our growth investing expert, Mike Cintolo. Here is what Mike wrote about the company in late September – right before the stock jumped 15% in a week!

“We think Pinterest has the makings of the next big online winner, with a unique, visual-based offering that provides a different experience than the competition: Whereas e-commerce sites are great if you already generally know what you want, Pinterest allows users to discover what they might want … and, increasingly, pull the trigger on that purchase. The firm is attracting a ton of new users (up 39% in Q2, including many prior users that had dropped off before) that should drive advertising revenues much higher, especially as the company more directly connects users with products. (Product-only searches grew eight-fold in the first half of this year!) Revenues were up just 4% in Q2 as advertisers pulled in, but the future looks very bright, with 30%-ish revenue growth and an earnings lift-off expected in the quarters ahead.”

Those words sound quite prescient, with PINS stock showing no signs of slowing, rising to new all-time highs last week. Buy it on the next dip.

Social Media Stock #3: Twitter (TWTR)

2020 Gains: 45%

Like Snap Inc., Twitter got off to a rocky start when it came public in late 2013. Four years after its market debut, TWTR was still trading at roughly half of its IPO price. There have been plenty of ups and downs since, revenues have stabilized the last couple years and the company has finally turned profitable, though both top and bottom lines will take a step back this year. Still, with strong growth expected to return in 2021, investors are looking forward, and TWTR stock has been on a tear since April.

Twitter (TWTR) has become one of the top social media stocks today.

In sum: If you believe message of the “The Social Dilemma” (I’ve watched it, and I do), social media may have changed social behaviors for the worse. But at least social media stocks could make you rich. And right now, these three stocks are the best candidates.

Chris Preston

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Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.

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