In this article, we will discuss: 10 Best Internet Content Stocks to Buy.
According to Grand View Research, The global digital content creation market value stood at $25.6 billion in 2022 and is projected to grow at a CAGR of 13.5% from 2023 to 2030. In 2023, North America dominated the digital content market. The primary drivers are the increasing use of social media and the digital change occurring across different industries. According to a study by Kepios, 62.3% of individuals in the entire globe use social media. As of April 2024, the average daily usage is 2 hours and 23 minutes per this study. Kepios analysis reveals that the number of people using social media grew meaningfully during the first three months of 2024, and annual growth rates are still significantly more than 5%.
Content creation is also being transformed by artificial intelligence. According to Custom Market Insights, the global market for AI-powered content creation was valued at $2.3 billion in 2024 and is projected to grow at a compound annual growth rate of 7.7% to reach USD 7.9 billion by 2033. Moreover, AI programs like GPT-4 are being used to generate graphics, music, and text. Gartner projects that 30% of all digital content will be artificial intelligence generated by 2025. This facilitates hyperpersonalization, which allows material to be personalized to specific consumers while also streamlining the content creation process.
Secondly, the popularity of short-form video material is skyrocketing, emerging as a major trend in the content production industry. Platforms like Instagram Reels and TikTok have paved the way for this movement. In 2024, 85% of marketers anticipate short-form videos to be the most successful type of social media content, according to a HubSpot survey. The snackable aspect of this format makes it ideal for grabbing the attention spans of increasingly transient internet consumers.
Thirdly, digital content is projected to become more interactive in the future. Advancements in virtual reality (VR) and augmented reality (AR) are opening up greater opportunities for immersive experiences. The AR and VR market is expected to reach $1.5 trillion by 2030, according to a PwC report.
If we take a broader view, according to the PWC’s Global Entertainment & Media Outlook 2024-2028, there are a number of significant growth prospects in the industry, which is expected to reach US$3.4 trillion by 2028. Notwithstanding persistent upheavals and the necessity of reinventing company models, the industry presents substantial income opportunities. Growth is anticipated to be driven by advertising, with spending forecast to reach US $1 trillion by 2026 because of connected TV and internet advertisements. Due to market saturation, streaming services are being forced to investigate ad-supported business models and creative content. Revenues from gaming are predicted to surpass $300 billion by 2028, particularly in Asia Pacific. The industry is still thriving. Companies navigating shifting market dynamics will find more opportunities in high-growth regions and market categories.
With that said, here are the 10 Best Internet Content Stocks to Buy.
Copyright: rawpixel / 123RF Stock Photo
Methodology:
We sifted through holdings of Internet Content ETFs and online rankings to form an initial list of 20 Internet Content stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
10. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Investors: 44
As of the end of 2023, 414 million people worldwide were using Snap Inc. (NYSE:SNAP) every day; the majority of these users are between the ages of 18 and 24. Snap is the company behind one of the most well-known social networking apps, Snapchat. The company and its users profit from a network effect, and the company is beginning to draw the interest (and revenue) of advertisers. North America contributes for over 65% of revenue, even though only about 25% of people reside there.
The firm added 10 million new users in Q2 2024 alone, with the majority of that growth coming from outside of North America, Europe, and Canada. Snap’s revenue increased 16% year over year as a result of this expansion and an increase in digital marketing spending.
Monetization is one of the main issues Snap Inc. (NYSE:SNAP) is dealing with. The majority of its customers are under 25, and they typically don’t have extra money to spend. However, the company’s answer to that issue is Snapchat+. Users of the paid subscription service get first access to new features and products, such as Snap’s AI technology, which has proven to be a compelling selling factor. By the end of June, 11 million individuals had signed up for Snapchat+, and in the second quarter of 2024, 2 million more people joined.
RiverPark Large Growth Fund stated the following regarding Snap Inc. (NYSE:SNAP) in its first quarter 2024 investor letter:
“Snap Inc. (NYSE:SNAP): SNAP was our top detractor in the quarter despite reporting fourth quarter results generally in line with or better than expectations. Revenue growth of 5% was roughly in line with investor estimates and at the high end of guidance, and EBITDA of $159 million was $49 million better than estimates. Daily Active Users (DAUs) were also ahead of investor expectations, ending the quarter at 414 million (about 2 million better), driven by continued innovation in Snap’s offerings. Revenue guidance for 1Q24 was also roughly in line with investor estimates, but EBITDA guidance of negative $55-95 million was well below estimates. The company pointed to increased infrastructure costs and a US focused marketing campaign for the lower-than-expected margin guidance.
Although the company continues to face near-term macro headwinds, we believe SNAP can accelerate its revenue growth over the next several years. With 2023 revenue expected to be $4.6 billion (as compared with Meta’s $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability as it improves platform functionality, continues to grow its audience (daily active users continue to grow at a double-digit rate), and expands its monetization.”
Snap might overtake X and Meta in the social media market share due to its distinctive multimedia app features that emphasize greater distinctiveness, as per Morningstar analysts.
Karthik Sarma’s SRS Investment Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 72,721,483 shares worth $1.20 billion as of Q2.
9. Pinterest, Inc. (NYSE:PINS)
Number of Hedge Fund Investors: 61
Pinterest, Inc. (NYSE:PINS) is an online resource for finding products and ideas that assist users in generating inspiration for everything from recipes to vacation spots. Since its founding in 2010, the network has attracted a predominantly female user base, making up about two-thirds of its over 500 million monthly active users. The firm sells digital ads to make revenue, and it is currently expanding its in-platform e-commerce offerings. Although the US and Canada account for 20% of users, the area generated 80% of income in 2023. Its goal is to take a portion of the global market for digital advertising.
Pinterest boasts 522 million monthly active users, 40% of whom are Gen Z. The platform focuses on video content and AI-powered features like “The Yes” to improve the user experience and boost engagement. Pinterest has been working on strengthening its e-commerce and advertising capabilities with the support of its strategic alliance with Amazon.
Pinterest has the ability to attract a large user base that is growing by 12% year on year and comes to the platform to discover new products or ideas. This intent-driven user behavior is very useful to advertisers because it leads to higher engagement rates and thus a higher conversion rate, allowing Pinterest to charge a premium for its services. Pinterest’s average revenue per user in the US and Canada was $6.85. In the first half of 2024, CFO amounted to $462.6 million. Pinterest projects sales of $885-900 million in Q3 2024, or a 16-18% YoY growth. By 2028, they also anticipate operating margins to reach 22%.
Columbia Contrarian Core Fund stated the following regarding Pinterest, Inc. (NYSE:PINS) in its Q2 2024 investor letter:
“Pinterest, Inc. (NYSE:PINS) – Pinterest delivered first-quarter results at the end of April that were nicely ahead of both consensus expectations and company guidance, resulting in a 6% revenue beat and a 45% free cash flow beat. Its share price rose following the earnings release and continued to move higher throughout the quarter. The company’s prospects should continue to improve as Pinterest is starting to take more and more of its advertisers’ budgets, as its data-rich initiatives are starting to pay greater dividends. Pinterest is a visual search engine with very high commercial intent and exposure to e-commerce growth. E-commerce growth has been a significant driver of global digital ad spending, which is an approximately $400 billion global market.”
With a buy recommendation and a $43 price target, Deutsche Bank analyst Benjamin Black started monitoring the company. According to the analyst, Pinterest draws wealthy users with strong purchase intent and is a large, highly individualized “digital catalog” that is “under-monetized.”
Cristan Blackman’s Empirical Capital Partners is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 268,024 shares worth $11.812 million as of Q2.
8. DoorDash, Inc. (NASDAQ:DASH)
Number of Hedge Fund Investors: 67
Through its internet-based platform, DoorDash, Inc. (NYSE:DASH) connects customers, restaurants, and drivers as an on-demand meal delivery service. Its emphasis on digital channels fits its business model into the “internet content & information” industry.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding DoorDash, Inc. (NASDAQ:DASH) in its Q2 2024 investor letter:
“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, or premium brands. New to the strategy was the online food delivery platform and logistics provider DoorDash, Inc. (NASDAQ:DASH) Since its IPO in 2021, the company’s scale has grown to entrench it with customers and consumers, though we have been cautious about its high valuation. Recently, the company reported lower-than-expected guidance for future margins and that caused its shares to sell off. In our view, DoorDash was appropriately investing for future growth and absorbing recent increased wage costs. Believing this short-term price dislocation made for an attractive entry price, we began buying, and DoorDash was up 2% through the end of the quarter.”
Moving forward, the company intends to supply not just food but nearly everything, including cosmetics, sports items, home décor, and alcohol, thereby increasing its overall market share. Long-term revenue growth is significantly fueled by this shift, which is critical. It has a $38.45 billion enterprise valuation, and even though DoorDash hasn’t finished expanding, it has managed to boost its sales by 22.3% YoY, showing significant demand for its products.
DoorDash has been investing to accelerate its growth, which has resulted in a negative net profit margin of -6%. Despite this short-term pressure on margins, the company has the potential to grow its revenues and eventually, its margins, which make it an attractive long-term investment as its non-food categories gain traction and the transformation matures over the coming years.
DoorDash is still a major player in the on-demand delivery space and its growing market share puts it in a strong position for growth in the future.
Andreas Halvorsen’s Viking Global is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 5,535,921 shares worth $602.20 million as of Q2.
7. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Investors: 88
By the end of 2023, Spotify Technology S.A. (NYSE:SPOT), which has its headquarters in Stockholm, Sweden, will have 602 million active monthly customers, making it one of the biggest music streaming services globally. The company makes revenue from its users using two different models: an ad-supported service and a premium service that requires a paid subscription. The percentage of Spotify’s total revenue in 2023 that came from premium and ad-supported services was 86% and 14%, respectively.
It is anticipated that rapidly expanding digital streaming will emerge as the preferred primary distribution medium in the constantly evolving music industry. Spotify can gain from several network effects that will enable it to acquire more users and more intangible assets linked to user information and listening habits. However, as per Morningstar analysts, it has a highly unpredictable cost structure that might restrict its capacity to operate profitably and leverage future operating leverage, and it confronts fierce competition from massive digital platforms with more resources.
Rowan Street Capital stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its Q2 2024 investor letter:
“Back in our 2022 year-end letter, we highlighted Spotify Technology S.A. (NYSE:SPOT), which was trading at roughly $15 billion at the time. We asked the question: “Does this valuation make any sense?” Now, just 18 months later, Spotify is valued at about $68 billion — a 4.3x increase. To put this in perspective, we initially estimated a valuation of about $70 billion by 2025, and it seems we got there a bit faster than anticipated. Spotify went public in 2018 at a price of $132 per share. We began purchasing shares that same year and continued to add to our position as the stock appreciated.
Today, Spotify trades at $337 per share, reflecting a total return of 155% since its IPO, or about 16% annually — quite a respectable performance. However, our average cost basis is $216, as we increased our position as the stock rose. As a result, the stock return from that cost basis stands at 58%. While it’s somewhat disappointing in comparison to the overall gain since the IPO, we remain confident in the position we’ve built, given the company’s strong long-term growth and profitability potential…” (Click here to read the full text)
On the other hand, Baron Focused Growth Fund stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its Q2 2024 investor letter:
“Spotify Technology S.A. (NYSE:SPOT) is a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported model. Shares of Spotify were up, largely attributable to impressive beats in gross margin and operating margin as well as the announcement of subscription price hikes. Given the strong value proposition of the product, Spotify is beginning to exercise its pricing power following last year’s initial price increases that saw minimal churn. Users continue to grow at a healthy pace despite the pricing impact. Spotify also continues to innovate on the product side, with early trials of generative AI features and the addition of new verticals like audiobooks, which have seen solid early adoption. On the cost side, Spotify is on a path to structurally increase gross margins, aided by its high-margin artist promotions marketplace, increasing contribution by its podcast division, and growth of the margin-accretive advertising business. We still view Spotify as a long[1]term winner in music streaming with potential to reach more than one billion monthly active users.”
Stephen Mandel’s Lone Pine Capital is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 1,687,415 shares worth $529.49 million as of Q2.
6. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 92
The Walt Disney Company (NYSE:DIS) operates three global business segments: entertainment, sports, and experiences. For more than a century, the company has created franchises and personalities that offer experiences and amusement. Examples of entertainment include the ABC broadcast network, Disney+, Hulu, and a number of cable television networks. Within the genre, Disney develops and releases motion pictures and television series. Its content is either increasingly kept in-house for use on Disney’s own streaming service and television networks, or it is licensed to theaters and other content providers. The sports area is home to ESPN and the ESPN+ streaming service. Experiences include Disney’s theme parks and resorts, which benefit from retail licensing as well.
The company is in charge of overseeing the media landscape’s evolution, especially the move away from linear television and toward direct-to-consumer, or DTC, streaming services. Disney had the opportunity to benefit from the traditional model since it owned ABC, the nation’s top sports network, ESPN, and the Disney Channel, the top children’s network. These incredibly important assets continue to assist the firm even as the industry shifts.
It will likely continue to see demand for its streaming services due to its unparalleled breadth of familiar characters, brands, and content library; additionally, this will provide the company an advantage when creating new movies and TV shows.
Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
Ken Fisher’s Fisher Asset Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 7,935,049 shares worth $787.87 million as of Q2.
5. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Investors: 103
Netflix, Inc.’s (NASDAQ:NFLX) business strategy is quite simple, with only one business: streaming. It has the most significant subscriber base for television entertainment in the US and throughout all other markets, with over 275 million customers globally. Nearly every nation on the planet, with the exception of China, has access to it. The company has focused on offering documentaries, movies, and episodic television on-demand, but it has never provided live programming or sports content.
It recently began to provide membership choices that are ad-supported, exposing it to the advertising sector in addition to subscription payments, which have historically accounted for nearly all of its revenue. The ad-supported version was selected by 45% of new signups in the most recent quarter.
In just the first half of 2024, Netflix, Inc. (NASDAQ:NFLX) added 17.4 million net new members, increasing its overall subscriber base to 277.7 million across 190 countries. The stock has, therefore, increased 50% YTD.
Netflix has created many highly regarded series that are exclusive to its platform and have garnered a substantial audience. Since the streaming provider generates more revenue than its rivals, it is more likely that the company will continue to create content with the goal to draw and keep subscribers.
RiverPark Large Growth Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its first quarter 2024 investor letter:
“Netflix, Inc. (NASDAQ:NFLX): NFLX was a top contributor in 1Q24 following strong fourth quarter earnings and 2024 guidance driven by better-than-expected subscriber adds (+13.1 million versus estimates of +8.9 million). The company’s subscriber growth continued to accelerate following the company’s crack down on password sharing and the rollout of the lower cost, advertising supported subscriber offering known as the Ad Tier. ARPU came in below expectations, but recently announced price increases in the US, UK and France showed signs of moving ARPU higher. NFLX guided 2024 operating margins to 24%, ahead of prior guidance of 22-23%, and guided to 2024 free cash flow of $6 billion.
The recent re-acceleration of subscriber growth, plus price increases on premium memberships and a stabilization of content investments, should position the company for low double digit annual revenue growth over the next few years while driving improved operating margin to more than 25%. We also believe that the stabilization of content spend should allow the company to continue to scale its FCF.”
Netflix benefits monetarily from its strong market share as the leading streaming TV service in the globe.
Ken Fisher’s Fisher Asset Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 4,357,952 shares worth $2.941 billion as of Q2.
