In this article, we will discuss 5 social media stocks getting hammered. To take a look at some more stocks under pressure, go to These 10 Social Media Stocks Are Getting Hammered.
5. Match Group, Inc. (NASDAQ:MTCH)
Number of Hedge Fund Holders: 55
Match Group, Inc. (NASDAQ:MTCH) is a Dallas, Texas-based operator of 45 online dating services across the world. Some of the notable brands in Match Group’s portfolio are Match.com, OkCupid, PlentyOfFish, and Tinder.
On July 19, Mario Lu at Barclays lowered the target price for Match Group, Inc. (NASDAQ:MTCH) from $81 to $65 and maintained an Equal Weight rating on the stock. The analyst sees discretionary expenditure by consumers under pressure. The analyst has preferred companies that have already taken a beating in the market and have a significant deleveraging event lined up. Match Group, Inc. (NASDAQ:MTCH) stock has lost more than 45% of its value since the start of 2022. If the deleveraging event works out for Match Group, Inc. (NASDAQ:MTCH), it could make way for multiple upward revisions in earnings estimates and target price. Some experts think that online dating platforms will show more resilience than compared to other segments of the social media sector.
Match Group, Inc. (NASDAQ:MTCH) was discussed in the Q4 2021 investor letter of Arch Capital. Here’s what the investment management firm said:
“We are long Match Group stock because it is the dominant player in online dating, giving it immense and growing power over the population of single people worldwide. This may seem like a callous way to describe the business, but it is the proper way to look at it from an investment lens.
For those that are unaware, Match Group owns every popular online dating property outside of Bumble, Badoo, and Grindr. Its apps and services include Tinder, Hinge, Match.com. BLK, Chispa, and many others…
In conjunction with this letter, we have published a report on Match Group. You can find it here: https://www.archcapitalfund.com/letters”
Of the 912 hedge funds in Insider Monkey’s database, Match Group, Inc. (NASDAQ:MTCH) was held by 55 hedge funds as of Q1 2022.
4. Pinterest, Inc. (NYSE:PINS)
Number of Hedge Fund Holders: 56
Pinterest, Inc. (NYSE:PINS) is a San Francisco, California-based image sharing and social media platform aimed at finding information on the internet through various forms of images and videos.
On July 14, the Wall Street Journal (WSJ) revealed that Elliot Management had built a stake of 9% in the company over the past several months. The hedge fund could be possibly attracted to the company because of the share price underperformance as Pinterest, Inc. (NYSE:PINS) has lost 50% of its value YTD. Furthermore, the company is facing a slowdown in user growth but operates a high-margin business, which can generate healthy cash flows in the future.
Elliot Management’s stake in Pinterest, Inc. (NYSE:PINS) provides three alternatives. First, the hedge fund can improve on streamlining the business operations. Second, the hedge fund can work with the company to find a strategic investor to expand Pinterest, Inc.’s (NYSE:PINS) operations. The third option is taking the company private, similar to how LinkedIn became private after being acquired by Microsoft Corporation (NASDAQ:MSFT).
Here’s what Harding Loevner said about Pinterest, Inc. (NYSE:PINS) in its Q1 2022 investor letter:
“Other detractors within Communication Services included Pinterest (NYSE:PINS), which is finding it hard to sustain the extremely rapid growth they enjoyed over the past two years of pandemic lockdown and social distancing.”
Overall, 56 hedge funds held a stake in Pinterest, Inc. (NYSE:PINS) at the end of the first quarter of 2022.
3. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Twitter, Inc. (NYSE:TWTR) is a San Francisco, California-based microblogging and social media company that is 9.2% down for the year.
Twitter, Inc. (NYSE:TWTR) has been leading the news following the announcement that Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk would acquire the company for $44 billion. However, the tech billionaire pulled out from the acquisition because he said the company did not follow multiple clauses of the merger deal.
Twitter, Inc. (NYSE:TWTR) posted its Q2 2022 results on July 22, which missed consensus estimates for revenue and EPS. Revenue fell by 0.8% YoY to $1.18 billion and missed the consensus forecast of $1.32 billion. This was the biggest revenue miss by Twitter, Inc. (NYSE:TWTR) on record. Meanwhile, adjusted loss per share was recorded at eight cents. Furthermore, Twitter, Inc. (NYSE:TWTR) reported Monetizable Daily Active Users (MDAUs) of 237.8 million versus the expectation of 238.08 million. The company blamed the decline in revenue on the challenging macroeconomic environment.
In its Q4 2021 investor letter, Greenwood Investors discussed its stance on Twitter, Inc. (NYSE:TWTR). Here’s what it said:
“The two other advertising challengers in our portfolio, including Twitter (TWTR), have experienced similar volatility while the business fundamentals keep humming along at or above their medium-term plans. At the opposite end of the spectrum, 37-year-old Parag Agrawal was recently named Twitter’s CEO. Parag will be instrumental in improving the notoriously slow execution at Twitter. This relatively unknown insider has only one shot to build a reputation. It is tied to the business plan unveiled a year ago, much to the surprise of a more skeptical audience. He has made swift changes to the leadership and management structure of Twitter in order to deliver on the accelerating user vision, while simultaneously improving the monetization potential of the platform through better targeting and direct-response (commerce-driven) ads.
Agrawal has played a fundamental role in the last decade in improving both timeline and ad relevance for users, and he is much less risk-averse than founder Jack Dorsey. He is keen on using the signal from user interests to better target ads and improve advertiser performance- something that Dorsey only committed to half heartedly. Although skepticism is significant, the re-affirmed commitment to double revenue in just over three years looks conservative to us. We are pleased to see the company doubling down on its commitment to make investments to accelerate user growth while also announcing an accelerated share repurchase plan in recent weeks. In short, he is moving quickly to ensure his reputation lasts longer than the “15 minutes of fame” typically afforded to such young executives.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 200
Meta Platforms, Inc. (NASDAQ:META) is a Menlo Park, California-based diversified technology conglomerate that owns notable social media and instant messaging platforms like Facebook, Instagram, and WhatsApp.
The stock of Meta Platforms, Inc. (NASDAQ:META) is down over 50% YTD as the company is trying to combat growth-related concerns, high inflation, and rising interest rates. The company is transitioning towards augmented reality and metaverse during all this uncertainty.
On July 19, Stephen Ju at Credit Suisse slashed the target price for Meta Platforms, Inc. (NASDAQ:META) from $273 to $245 and maintained an Outperform rating on the stock before its Q2 2022 results. The analyst anticipates Meta Platforms, Inc. (NASDAQ:META) to report in-line Q2 2022 results and expects the growth outlook for the second half of 2022 to be impacted by broader macroeconomic concerns. Meta Platforms, Inc. (NASDAQ:META) is shifting its resources from the News Tab and newsletter platform toward a strong Creator economy. This move is made to compete with TikTok, which is gaining market share in the space.
Here’s what Moon Capital Management said about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2022 investor letter:
“For most of the past decade, Meta’s share price has marched almost lockstep with its meteoric rise in earnings and free cash flow. That was until almost a year ago. Since August 2021, Meta shares have dropped more than 50 percent, while its free cash flow has increased 60 percent.
While Meta is facing certain headwinds related to changes in Apple’s latest operating system release (iOS 14’s optional identifier for advertisers (IDFA) blocking) that impact Meta’s ability to track and thus effectively target its user base, we believe the company will be able to effectively mitigate these changes. Meta estimates that these changes will result in a $10 billion headwind in 2022. To the extent that the company solves the IDFA problem over time, improvements in returns on advertising spending could result in a partially recovery of revenue dollars that creates a future tailwind.
Meta is also spending aggressively on augmented and virtual reality through the company’s Reality Labs division. Meta’s vision is that, over the next decade, the expansion of virtual reality may create the next major computing platform after mobile. The company is investing heavily in this area, dedicating more than $10 billion per year in the form of operating expenses running through the income statement. While the company is currently being penalized for these investments, we think it is more appropriate to view these costs as free options, given that the plug can be pulled at any time if the investments don’t develop into meaningful revenue contributors.
Meta’s core advertising business is clearly entering a more mature phase of its life cycle – or, at least, it is no longer the tiny newcomer in the advertising industry. Meta is now a $120 billion-a-year business, more than ten times its size in 2010. Starting from a base of less than $2 billion in 2010, Meta’s revenues have grown more than 40 percent annually. While it is easier to produce 40 percent annual revenue gains with a $2 billion business than with a $120 billion one, we expect that Meta will continue to siphon ad spending from traditional broad-based, “shotgun approach” legacy ad platforms, such as newspaper, magazine, radio and television.”
Beech Hill Partners was the leading hedge fund investor in Meta Platforms, Inc. (NASDAQ:META) during Q2 2022.
1. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 205
Alphabet Inc. (NASDAQ:GOOGL) is a Mountain View, California-based diversified technology holding company.
The trillion-dollar company has shed more than 26% of its value since the start of 2022 as its equity investment in notable companies like CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Duolingo, Inc. (NASDAQ:DUOL), and Magenta Therapeutics, Inc. (NASDAQ:MGTA) have taken a significant beating.
Alphabet Inc. (NASDAQ:GOOGL) has online video sharing and social media platform YouTube under its holdings. The tech conglomerate has announced that YouTube TV has surpassed 5 million subscribers and has become the top streaming TV service in the US by surpassing Hulu. Meanwhile, Alphabet Inc.’s (NASDAQ:GOOGL) response to TikTok in the form of YouTube shorts has reached 1.5 billion monthly users.
On July 22, Scott Devitt at Stifel trimmed Alphabet Inc.’s (NASDAQ:GOOGL) target price from $155 to $145. The analyst lowered his advertising revenue estimates to incorporate the impact of lower third-party ad agency estimates.
Alphabet Inc. (NASDAQ:GOOGL) was mentioned in the Q1 2022 investor letter of Farrer Wealth Advisors. Here’s what the firm said:
“Alphabet: We won’t waste much time trying to explain to our clients why Alphabet is such a phenomenal business, we believe that is quite self-evident. The better explanation is why we never bought Alphabet before. The reason was a personal bias we held based on three beliefs (which we now believe to be incorrect)
Growth in YouTube would stall as the increased ad-load would turn-off viewers (the double ad-load at the beginning of videos for example). Consumers will focus on discovery rather than search to purchase new items. For example – using Instagram/TikTok to decide what new clothes to buy instead of ‘googling’ for clothes. Other Bets: In general, we felt that capital spent on “Other Bets” has been a bit wasteful with the segment earning just around $3.1bn in revenue versus nearly $21bn in operating losses over the last five years…” (Click here to see the full text)
The number of hedge funds holding a stake in Alphabet Inc. (NASDAQ:GOOGL) declined from 209 in Q4 2021 to 205 in Q1 2022.
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