In this article, we will discuss 10 social media stocks getting hammered. To take a look at some more stocks under pressure, go to These 5 Social Media Stocks Are Getting Hammered.
In 2022, investors are preparing themselves for the slowest growth in revenue for the social media sector ever since its emergence. According to Bloomberg, the US social media companies lost $130 billion of their market value on July 22 following disappointing quarterly results by media companies like Snap Inc. (NASDAQ:SNAP) and Twitter, Inc. (NASDAQ:TWTR).
The social media sector had a sensational 2021 as the ad sales revenue of social media companies increased by 36% YoY to $58 billion. Brands raised their marketing outlay to reach more customers as the US economy staged a recovery from the COVID-19 pandemic. However, the dynamics are changing in 2022 as inflation has risen to a multi-decade high, and the probability of a recession has caused brands to lower their marketing spending to control costs. The Global X Social Media ETF (SOCL), which includes a group of social media stocks, had declined over 30% as of June 6. In addition to dealing with increasing interest rates and inflation, some advertisers are now having to rearrange their advertising budget due to labor constraints and supply chain interruptions. According to RBC Capital Markets, a significant decline in ad expenditure is expected in the digital sector, which would continue to pressure social media stocks’ prices.
Meta Platforms, Inc. (NASDAQ:META) CEO Mark Zuckerberg highlighted the current economic downturn as one of the worst ever seen in recent history. This prompted the parent company of Facebook to slow down its recruitment. According to media intelligence firm MAGNA, social media ad revenue around the world is expected to grow by 11% this year as opposed to a prior estimate of 18%. Although analysts had already anticipated deceleration in growth, the combination of short video app TikTok intensifying competition and Apple Inc (NASDAQ:AAPL) changing its privacy policy regarding advertisements has aggravated investor concerns significantly. Social media companies like Snap Inc. (NASDAQ:SNAP) and Meta Platforms, Inc. (NASDAQ:META) have started to face significant challenges in targeting advertisements and measuring their effectiveness on the iOS platform following the change in the privacy policy. Stocks like Twitter, Inc. (NYSE:TWTR) and Alphabet Inc. (NASDAQ:GOOGL) have also recorded a decline in their values due to the growth slowdown in the social media sector.
Our Methodology
In this article, we will take a look at 10 notable social media stocks that are getting hammered. We will look into the specific reasons why these stocks are taking a beating and the long-term outlook for these entities. We have ranked these stocks according to the number of hedge fund holders, based on the 912 elite funds in Insider Monkey’s database as of Q1 2022.
10. Bumble Inc. (NASDAQ:BMBL)
Number of Hedge Fund Holders: 17
Bumble Inc. (NASDAQ:BMBL) is an Austin, Texas-based dating platform.
Bumble Inc. (NASDAQ:BMBL) is competing against an established competitor in the form of Match Group, Inc. (NASDAQ:MTCH). Competing against a giant can be challenging given the limited resources at the company’s disposal. The stock of Bumble Inc. (NASDAQ:BMBL) has remained flat since the start of the year and has not yielded any returns to its investors due to growth and inflation-related concerns.
Over the last twelve months, Bumble Inc. (NASDAQ:BMBL) stock has lost 35% of its value in comparison to the S&P 500’s decline of 11.9% during the same period. However, Cory Carpenter at JPMorgan thinks that Bumble Inc. (NASDAQ:BMBL) stock can do well in the present macroeconomic environment if it manages to counter certain growth risks successfully. During the 2009 recession, dating stocks held their own and can be expected to do so again. The penetration of dating apps is significantly higher now than it was in 2009. Analysts anticipate the Bumble app and Badoo app to report 1.93 million and 1.13 million paying subscribers, respectively, during Q2 2022.
Bumble Inc. (NASDAQ:BMBL) was discussed in the Q1 2022 investor letter of Polen Capital. Here’s what the firm said:
“Online dating company Bumble delivered strong fourth quarter growth metrics in March. The company has been successfully executing on its core strategic priorities of driving scale and engagement, monetization, and profitability. This is a newer position for us that we opportunistically purchased in the quarter. We are excited about the market potential for online dating, which has been growing in popularity but is still underpenetrated in many markets. The stigma related to it has been lessened as a result of the pandemic and general activity should improve as the economy reopens. We think Bumble is competitively advantaged because the company empowers women to make the first move. We believe that Bumble can take share in dating and leverage its brand in other categories.”
The bearish hedge fund sentiment on Bumble Inc. (NASDAQ:BMBL) is also visible through the decrease in the number of hedge fund holders in the stock from 25 in Q4 2021 to 17 in Q1 2022.
9. NetEase, Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 29
NetEase, Inc. (NASDAQ:NTES) is an Hangzhou, China-based company that provides advertising services and operates e-commerce platforms, online mobile and PC games, and an online music streaming platform.
NetEase, Inc. (NASDAQ:NTES) stock has lost 6% of its value since the start of the year. The company is expected to report its Q2 2022 results on August 30. In the last quarter, NetEase, Inc. (NASDAQ:NTES) reported an EPS of ¥1.54, missing the consensus estimate of ¥7.17, reflecting a difference of 78.53%.
Although NetEase, Inc. (NASDAQ:NTES) stock price has been in the red, the outlook seems bright as Esme Pau at Macquarie initiated coverage on NetEase, Inc. (NASDAQ:NTES) stock with an Overweight rating and a target price of $129 in a research note issued on July 5. The analyst highlighted that the restart of gaming approvals in China during Q2 2022 is expected to revive the growth of the Chinese domestic online gaming market. This should result in a re-rating of companies by analysts.
8. IAC/InterActiveCorp (NASDAQ:IAC)
Number of Hedge Fund Holders: 48
IAC/InterActiveCorp (NASDAQ:IAC) is a New York-based Internet company that has a presence in over 100 countries through media and Internet entities and has created $100 billion in value for shareholders since its formation. Some of the notable brands under the InterActive Corp umbrella are Care.com, Health Magazine, and Investopedia.
IAC/InterActiveCorp (NASDAQ:IAC) has a history of building scalable internet companies in the past and has spun-off notable social media companies like Expedia Group, Inc. (NASDAQ:EXPE), LendingTree, Inc. (NASDAQ:TREE), Match Group, Inc. (NASDAQ:MTCH) and Tripadvisor, Inc. (NASDAQ:TRIP). However, since the start of 2022, IAC/InterActiveCorp (NASDAQ:IAC) stock has lost nearly 12% of its value due to internal developments. IAC/InterActiveCorp (NASDAQ:IAC) is facing short-term headwinds due to the rebranding of Angi’s List to Angi. Once the rebranding is complete, the marketplace will become a one-stop solution for home services. The service model pursued by Angi could bring numerous consumers on board and result in fast growth.
Longleaf Partners Fund shared its outlook on IAC/InterActiveCorp (NASDAQ:IAC) in its Q1 2022 investor letter. Here’s what was said about the company:
“IAC – The conglomerate discount on this digital holding company grew wider in the quarter amidst a period of broad uncertainty and continued technology stock declines. Unlike most of its tech peers, IAC began the year already uniquely discounted and today trades at less than half of our appraisal value and less than 10x estimated free FCF per share power. Underlying holding Angi (previously Angie’s List) reported a disappointing quarter. Angi represents only 25% of value but swings the market perception and stock price since it is also publicly traded. The market is not yet giving credit to the Dotdash Meredith deal creating a digital publishing leader, given the lack of near-term reporting clarity since the deal just closed and 2022 is a transition year. Additionally, IAC’s underlying holdings in carsharing company Turo and casino and online gaming company MGM remain not properly recognized by the market. CEO Joey Levin and Chairman Barry Diller have a history of creating value-accretive catalysts to close the price to value gap.”
IAC/InterActiveCorp (NASDAQ:IAC) was held by 48 hedge funds at the end of Q1 2022.
7. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Spotify Technology S.A. (NYSE:SPOT) is a Swedish audio streaming and media services corporation. The platform has 422 million monthly active users (MAUs), and the headcount of premium subscribers stands at 182 million as of Q1 2022. The company went through the acquisition of the music trivia game Hurdle on July 12 in a move to enhance music discovery, and aid musicians and performers reach new fans.
Spotify Technology S.A. (NYSE:SPOT) has lost 57% of its value since the start of the year. In a note issued to investors on July 7, Mark Mahaney at Evercore ISI slashed the target price on Spotify Technology S.A. (NYSE:SPOT) from $235 to $230. The analyst has significantly reduced his estimates across the board for internet companies. He has cited high inflation, adverse foreign exchange rates, the possibility of a recession, and a softening of consumer demand as the key reasons for reducing the target price. Spotify Technology S.A. (NYSE:SPOT) has triggered an investigation against tech giant Apple Inc (NASDAQ:AAPL) as it claims that the manufacturer of the iPhone has unfairly restricted its access to Apple Music on iPhones.
Spotify Technology S.A. (NYSE:SPOT) was mentioned in the Q2 2022 investor letter of Rowan Street Capital LLC. Here’s what the firm said:
“Spotify (NYSE:SPOT) disrupted the music industry and brought it back to life via streaming.
Daniel Ek, Spotify Founder and CEO
Visionary entrepreneur who set out to reimagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry. He beat Apple, Amazon, Pandora to become the largest music streaming platform. Daniel owns 17% of the company, and his co-founder Martin Lorentzon owns 11%.
When Spotify went public in 2018, they were a music-streaming company, but they have evolved dramatically over the last four years. Daniel Ek’s ambitions did not stop at music, as Spotify is focused on building the global audio infrastructure of the Internet. They are continuing to expand and build on the strong foundation in music, applying their learnings and leveraging their leading 420 million user base to move into new verticals like podcasting and audiobooks, ultimately broadening their value proposition. As a result, they are building a more resilient business. For example, in three years, Spotify has gone from basically zero to being the market leader in podcasting – a business that we believe will enable a large influx of high-margin revenue through advertising and direct monetization. Just as video content is a trillion-dollar opportunity, we view audio through a similar lens. Spotify has the potential to become the Google of audio.
We believe Spotify is one of the most relevant digital platforms in existence today, as it has transformed itself to a fully-fledged platform where artists and creators can create, engage, and earn. A platform fueled by subscription, advertising and creator service models, applied to music, podcasts, audiobooks and more. At a current market value of just $20 billion, we think Wall Street is not appreciating the true long-term potential of the Spotify Machine.”
Spotify Technology S.A. (NYSE:SPOT) was owned by 49 hedge funds at the end of Q1 2022.
6. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 54
Snap Inc. (NYSE:SNAP) is a Santa Monica, California-based camera and social media company.
Snap Inc. (NYSE:SNAP) triggered the hammering of the social media companies on July 22 after reporting disappointing Q2 2022 earnings. Following the results, Benjamin Black at Deutsche Bank downgraded Snap Inc. (NYSE:SNAP) stock from a Buy to a Hold rating and lowered the target price from $25 to $14. The key takeaway from the quarterly result was the company’s revenue miss and a flat YoY growth during this quarter. The flat YoY growth during Q2 is due to the privacy policy change by Apple, macroeconomic headwinds, and increasing competition. The analyst also added that Snap Inc.’s (NYSE:SNAP) ability to grow has declined as incremental budgets have been slashed. Snap Inc. (NYSE:SNAP) refrained from providing Q3 2022 revenue guidance due to the challenging environment.
Here’s what Heartland Advisors said about Snap Inc. (NYSE:SNAP) in its Q2 2022 investor letter:
“Snap-on Inc. (NYSE:SNA) represents a typical holding in that its recent earnings performance, which easily topped analyst expectations, underscored the company’s ability to pass on higher costs to customers. Based in Kenosha, Wisconsin, Snap-on designs and manufactures professional-grade tools with a particular focus on the automotive-repair industry.
While the company was a top performer in the portfolio during the quarter, we believe its current valuation – trading at 12x earnings – leaves plenty of room to run. By comparison, peers trade at 15x earnings even though Snap-on has better margins and operates with less leverage than its competitors.
Meanwhile, several secular tailwinds, including an aging fleet of used cars and ever-increasing vehicle complexity, should prove beneficial to Snap-on’s business over the longer term. Snap-on’s history of distributing dividends, which has grown at a 7% CAGR over the past 35 years, underscores its financial discipline and is an added appeal.
Out of the 912 hedge funds being tracked by Insider Monkey as of Q1 2022, 54 funds held a stake in Snap Inc. (NYSE:SNAP).
In addition to Snap Inc. (NYSE:SNAP), stocks such as Twitter, Inc. (NYSE:TWTR), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL) have also taken a beating in the recent past.
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Disclose. None. These 10 Social Media Stocks Are Getting Hammered is originally published on Insider Monkey.
