3 Social Media Stocks Capitalizing on Digital Advertising

Advertising on social media is not a new phenomenon. It has existed since the dawn of the internet. However, it has evolved significantly in recent years due to growing social media traffic, the rise of generative AI (GenAI), and other technological advancements, transforming how brands engage audiences and deliver personalized marketing.

Amid this backdrop, investing in fundamentally stable social media stocks, Match Group, Inc. (MTCH), Pinterest, Inc. (PINS), and Meta Platforms, Inc. (META), which are paving the way for the new age of digital advertising, could be a wise move for investors.

Social media usage has surged in recent years, driven by the widespread adoption of smartphones and the internet. Half of U.S. adults now use Instagram, with smaller numbers on TikTok, LinkedIn, X, and Snap Inc. This growth has boosted platform popularity and expanded opportunities for digital advertising.

With e-commerce now accounting for around $7.2 trillion in sales each year, businesses are quick to switch to these websites for their future endeavors. Businesses have spent a total of 11.1% of their budgets on digital marketing, up 3% from one year ago, and are expected to continue growing their digital marketing spend to 12.7% within the year.

Additionally, with businesses' increased budgets, newer and more advanced solutions like GenAI have also aided in establishing a robust digital footprint. GenAI can analyze vast amounts of information to understand what may be helpful for customers, creating a dynamic environment for advertisers.

Now, let us dive deep into the fundamentals of three Internet stocks that are poised to thrive with the increased reach of digital advertising.

Stock #3: Match Group, Inc. (MTCH)

MTCH provides dating applications and products. The company’s portfolio of brands include Tinder, Hinge, Match, Meetic, OkCupid, Pairs, Plenty Of Fish, Azar. Its services are available in over 40 languages to users worldwide.

MTCH’s trailing-12-month gross profit margin of 71.51% is 37% higher than the industry average of 52.19%. Its trailing-12-month levered FCF margin of 23.07% is 156% higher than the sector average of 9.01%. Likewise, the stock’s asset turnover ratio of 0.78x is 58.9% higher than the industry average of 0.49x.

For the fiscal 2024 fourth quarter that ended December 31, 2024, MTCH’s revenue came in at $860.18 million. Its adjusted operating income was reported to be $323.94 million. Additionally, net earnings and net earnings per share attributable to MTCH shareholders amounted to $158.30 million and $0.59, respectively.

Analysts expect MTCH’s EPS for the fiscal 2025 first and second quarter ending in March and June to increase 4% and 16.2% year-over-year to $0.66 and $0.80, respectively. Also, the company has surpassed the consensus revenue estimates in three of the four trailing quarters.

MTCH’s stock has surged 2.8% over the past month and 5.2% over the past nine months, closing the last trading session at $33.58.

MTCH’s POWR Ratings reflect its fundamentals. MTCH has a B grade for Quality and Value. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Within the A-rated Internet industry, MTCH is ranked #26 out of 47 stocks. To access MTCH’s Growth, Sentiment, Stability, and Momentum ratings, click here.

Stock #2: Pinterest, Inc. (PINS)

PINS powers a dynamic visual search and discovery platform, helping users explore and find inspiration across various interests, from recipes and home decor to fashion and more. The platform allows users to seamlessly search, save, and shop their favorite ideas.

PINS’ trailing-12-month gross profit margin of 78.94% is 51.3% higher than the industry average of 52.19%. Its trailing-12-month net income margin of 6.21% is 60.7% higher than the 3.87% industry average. Additionally, the stock’s trailing-12-month levered FCF margin of 24.39% is 170.6% higher than the sector average of 9.01%.

For the fiscal 2024 third quarter that ended September 30, 2024, PINS’ revenue increased 17.7% year-over-year to $898.37 million. Its net income and net income per share rose 353.8% and 300% from the prior year’s quarter to $30.56 million and $0.04, respectively.

Street expects PINS’ revenue and EPS for the fiscal 2024 fourth quarter that ended in December 2024 to increase 16.1% and 22.2% year-over-year to $1.14 billion and $0.65, respectively. Plus, the company has surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.

PINS’ stock has surged 7.6% over the past month and 16.2% over the past six months to close the last trading session at $33.30.

PINS’ POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Quality. It is ranked #20 out of 47 stocks within the Internet industry.

In addition to the POWR Rating highlighted above, you can check PINS’ ratings for Value, Stability, Sentiment, Momentum, and Growth here.

Stock #1: Meta Platforms, Inc. (META)

META creates innovative products that connect people with friends and family across mobile devices, personal computers, virtual reality headsets, and wearables. Its ecosystem includes popular apps like Facebook, Instagram, Messenger, and WhatsApp. The company operates through two key segments: Family of Apps and Reality Labs.

META’s trailing-12-month EBITDA margin of 51.83% is 174% higher than the industry average of 18.92%. Its trailing-12-month levered FCF margin of 22.53% is 150% higher than the sector average of 9.01%. Furthermore, the stock’s trailing-12-month net income margin of 37.91% is 880.4% higher than the 3.87% industry average.

For the fiscal 2024 fourth quarter that ended December 31, 2024, META’s revenue increased 20.6% year-over-year to $48.39 billion. Its income from operations rose 42.6% from the year-ago value to $23.37 billion.

Moreover, the company’s net income and EPS grew 48.7% and 50.5% from the prior year’s quarter to $20.84 billion and $8.02, respectively.

The consensus revenue and EPS estimates of $41.43 billion and $5.22 for the fiscal 2025 first quarter ending in March reflect a year-over-year rise of 13.7% and 10.9%, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the four trailing quarters, which is notable.

The company’s stock has surged 48.2% over the past six months and 53.4% over the past year, ending the last trading session at $704.87.

META’s stable fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

META has an A grade for Quality and a B for Sentiment. Within the same industry, META is ranked #16 out of 47 stocks.

Click here to access META’s Value, Stability, Momentum, and Growth ratings.

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META shares were unchanged in premarket trading Thursday. Year-to-date, META has gained 20.39%, versus a 3.10% rise in the benchmark S&P 500 index during the same period.

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.

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