Social Media Stock Trends. An 8.93% Drop Vs 51.44% Gain Over 1 Month

In the competitive arena of social media stocks, titans Meta Platforms (NASDAQ:META) and Snap Inc. (NYSE:SNAP) presented contrary scripts after their latest financial disclosures, painting a divergent picture of their market trajectories. Over the last month, META trades down 8.93%, as SNAP has shot up by 51.44%. Whilst this is a shortened timeframe in a much longer battle, we want to take a look through some of the differences in the reports.

Meta Platforms, known for its ownership of Facebook, Instagram, and WhatsApp, saw its stock stagger in the wake of a lukewarm revenue forecast for the second quarter of 2024 coupled with its dedication to ramping up investments in artificial intelligence initiatives. Investors, unsettled by this outlook, contributed to the company’s stock descending. Despite this retreat, Meta's shares have maintained a 36.36% appreciation year-to-date.

In contrast, Snap, the parent company of the popular messaging service Snapchat, witnessed its stock catapult after announcing a strong performance in the first quarter and providing reassuring guidance for the upcoming second quarter. However, Snap's ascension could not surpass a 3.78% year-to-date increase, which pales in comparison to Meta's YTD.

Meta continues to stand as the market leader of social media with a gargantuan user base of 3.24 billion daily active users spread across its suite of applications. In comparison, Snap’s Snapchat, though a cultural force in its own right, boasted a considerably smaller yet significant 422 million daily active users in the first quarter.

Both companies predominantly sustain themselves through ad revenues, yet they pivot towards diversifying their income streams; Meta by nurturing its Reality Labs segment, dedicated to virtual and augmented reality, and Snap by evolving its subscription service Snapchat+ to decrease ad reliance.

Challenged by Apple’s privacy modifications, which hampered their ad targeting capabilities, and vying against TikTok for user engagement, Meta and Snap rolled out a slew of new features and tools aimed at enhancing their competitive edge.

Meta, despite its larger size, outpaced Snap in the growth race. For the first quarter of 2024, Meta's year-over-year revenue spike hit 27%, overshadowing Snap’s respectable 21% ascend. Notably, Meta capitalised on ad purchases from Chinese enterprises, which contributed to 10% of its revenue in the period.

Snap's Average Revenue Per User (ARPU), which experienced a slump in 2023, rejuvenated in the first quarter of 2024. Looking ahead, Meta is eying a 14%-22% year-over-year revenue uptick for the second quarter, while Snap maintains a slightly conservative yet impressive expectation of 15%-18% growth.

Analysts have weighed in, predicting Meta's revenue to inflate by 18% for the full year, compared to Snap's anticipated 16% increase. From a profitability standpoint, Meta brandishes an expanding operating margin, in stark contrast to Snap, which while unprofitable, is projected to see improved margins.

In the valuation battleground, Meta's stock commands seven times this year's sales, dwarfing Snap's five times, yet Meta justifies this with a larger, more rapid growth, and palpable profitability. Furthermore, Meta's stock is set at 12 times this year's forecasted adjusted EBITDA, whereas Snap's lofty 60 times ratio underscores investor confidence in its future profitability.

It appears the market's expectations overshot for Meta, while Snap benefited from a more grounded hope. Despite their recent stock movements, in the long view, Meta is deemed by many as the superior investment within the social media landscape when juxtaposed with Snap.