In this article, we will look at 7 Cheap Social Media Stocks to Invest In.
Social Media Platforms for News Consumption
Digital sources, especially social media, have become a critical part of the news diets of Americans. According to the Pew Research Center, more than half of US adults (54%) sometimes get news from social media. This number has risen compared to the past few years. Facebook and YouTube are the most popular places for US citizens to consume news, especially election-related updates, just days before Americans set out to choose their next president. Around a third of US adults say they regularly absorb news from these two sites.
However, despite having relatively small overall audiences, some social media platforms are becoming increasingly popular news destinations among their users. For instance, around 59% of X users say that they get news from the platform, while 57% of Truth Social users say the same, which is the site owned by former POTUS Donald Trump. In contrast, only 14% of LinkedIn users regularly get news from the platform. TikTok is another social media platform gaining increasing popularity, especially among the younger generation. Around 52% of TikTok users get regular news from the platform. This number grew from 43% in 2023 and just 22% in 2020. YouTube and Instagram are also gaining more followers, highlighting the increasing role of social media platforms in disseminating news. These trends hold special significance in the current US landscape, with presidential campaigns in full swing.
The US Election Campaign and Social Media
Platforms like Facebook, Instagram, and X are increasingly developing new ways to market political campaigns, allowing more and more voters and candidates to interact. These platforms have also reversed their ban on former POTUS Donald Trump since he is once again back in the presidential race. However, the circumstances pose a serious responsibility on such social media platforms: a legal obligation to offer a safe environment to their users amid expectations that they provide former POTUS Trump a platform that is not restricted or over-regulated for their campaigns, especially when compared to his political opponents.
Social media is thus being used as one of the most powerful tools in a presidential campaign’s toolbox. However, the use of these platforms is also raising concerns surrounding the echo chamber and bandwagon effect. According to research published in the Proceedings of the National Academy of Sciences in 2021, content curation by social media platforms created political echo chambers. These chambers are a natural part of a social media platform’s impersonal algorithm that shows users the content they are interested in by analyzing their engagement. Thus, a platform is very likely to continually recommend left-leaning content to a politically left-leaning person, and vice versa.
Social media echo chambers, therefore, lead to the bandwagon effect, reinforcing and amplifying mass media’s messages and affecting the public’s perception of candidates and their operations. Such happenings allow misinformation to spread quickly and run rampant. According to statistics by the Pew Research Center comparing the political perceptions of 2016 and 2020, the number of people who found social media-led political discussions “interesting and informative” fell from 35% in 2016 to 26% in 2020.
However, these drawbacks do not undermine the critical importance of social media platforms in disseminating news, swaying public perception, and acting as a tool in the current politically charged landscape.
With these trends in mind, let’s look at the 7 cheap social media stocks to invest in.
Photo by Jakob Owens on Unsplash
Our Methodology
We first consulted ETFs and online rankings to create an initial list of 20 publicly traded social media companies with forward P/E ratios of less than 20. From this list, we selected the 7 stocks with the highest number of hedge fund holders as of Q2 2024 and used that as our ranking metric.
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).
7 Cheap Social Media Stocks to Invest in
7. Tencent Holdings (OTC:TCEHY)
Forward P/E: 15.9
Analysts’ Upside Potential: 20.94%
Number of Hedge Fund Holders: 1
Tencent Holdings (OTC:TCEHY) is a holding company that provides value-added services (VAS), online advertising, FinTech, and business services. This Chinese multinational technology conglomerate is one of the largest grossing multimedia companies in the world by revenue and operates social media platforms such as WeChat, Qzone, and QQ Messenger. Tencent Holdings (OTC:TCEHY) operates through four segments: the VAS Segment, the Online Advertising segment, the FinTech and Business Services segment, and the Other segment.
The VAS segment encompasses video account live broadcast services, online games, paid video membership services, and other social network services. The Online Advertising segment manages media advertising, social media, and other advertising businesses. The FinTech and Business Services segment deals with FinTech and cloud services, while the Other segment manages the investment, production, and distribution of television programs and films for third parties, merchandise sales, copyright licensing, and other activities.
The company has a promising financial standing. Its domestic and international games revenue increased due to growing user engagement and the successful launch of some of its new games. Total revenue for Q2 2024 increased by 8% year over year. Tencent Holdings (OTC:TCEHY) is increasingly focusing on its Communications and Social Network, enhancing content and functionalities across its platforms. These include Video Accounts, Mini Programs, and Tencent Channels. User time-spend for Video Account grew significantly year over year in the quarter, primarily due to more local content and enhanced algorithms. In addition, the company’s thriving algorithm is allowing creators to increase revenue generation by reaching a wider audience.
Tencent Holdings (OTC:TCEHY) is also facilitating e-commerce activity by systematically improving transaction capabilities to ensure a seamless shopping experience for users and boost sales for merchants. Its Mini Programs have become a significant platform for users to connect with content providers and merchants offline and online. Such initiatives are painting an optimistic picture for the company, placing it 7th on our list of the 7 cheap social media stocks to invest in.
6. Yalla Group Limited (NYSE:YALA)
Forward P/E: 5.81
Analysts’ Upside Potential: 34.43%
Number of Hedge Fund Holders: 4
Yalla Group (NYSE:YALA) is a holding company based in the United Arab Emirates. Through its subsidiaries, it operates in one segment: the social networking and entertainment platform. Yalla Group operates a voice-centric social networking and entertainment platform in the North Africa and Middle East region. Users can use Yalla, the company’s mobile application, to conduct online voice-based chatting or live streaming. Yalla Ludo is another platform for voice-based chatting while playing board games such as Ludo and Domino. Users can access the platform’s basic functions for free.
Yalla Group (NYSE:YALA) operates through Yalla United Arab Emirates, Shenzhen Moov, and Hangzhou Yale. Yalla UAE acts as the primary business operation center, managing marketing, sales, customer service, and other business operations, while Hangzhou Yale conducts product development and technology functions.
Yalla Group (NYSE:YALA) is running on strong fundamentals. Its Q2 2024 results beat the upper end of its guidance even with the impact of one month of Ramadan. Revenues reached $81.2 million, highlighting the growing profitability and popularity of Yalla and Yalla Ludo. The company’s operating efficiency improvement also yielded positive results, raising its net margin to 38.6% in Q2. Yalla Group (NYSE:YALA) remained dedicated to improving its operational procedures in Q2, optimizing technology utilization to increase efficiency, improving user engagement, and refining its user acquisition strategy.
The company is also capturing the potential of the gaming sector in the MENA region by consistently investing in its mid-core and hard-core game markets. It is focusing on the divestment and acceleration of mid-core and hard-core games, with its product teams developing and refining a solid pipeline of self-developed games to debut throughout 2025. The company is also exploring applications of AI to optimize productivity, especially in UI design.