The broad basket of social media stocks has much to gain as they seek to trim inefficiencies while investing in various growth drivers. Undoubtedly, generative artificial intelligence (AI) can help many big-name social media firms better monetize their swollen user bases.
Additionally, AI seems to be the magic solution to automating less-than-efficient aspects of operations while driving forth innovative features and profitability opportunities. As AI becomes the new normal, while various firms look to enter the metaverse, social media companies must invest to stay relevant as the “spatial” medium gradually inches into our everyday lives.
Undoubtedly, those chunky, often expensive headsets may remain quite niche for now. But social media firms add another dimension to their products; perhaps the headsets will gain the “killer apps” that we all seek as reasons to make the big splurge on fancy face computers!
Meta Platforms (META)
Undoubtedly, Meta Platforms (NASDAQ:META) continues to flex its muscles as one of the biggest and best social media stocks to buy now. Meta founder and CEO Mark Zuckerberg is a genius, and he’s not about to lift his foot off the pedal after driving efficiencies and making cuts to less “growthy” parts of his business.
Even after Meta’s multi-year, multi-bagger run, various analysts see more room for growth as the firm looks to expand its advertising business. Ronald Josey over at Citigroup (NYSE:C) sees META stock climbing to $590.00 per share on the back of “newer ad innovations,” including Advantage+ Creative and a long-form version of its TikTok rival Reels. Such a price target entails an 18% gain from here.
In many ways, Meta stands out as one of the best that the Magnificent Seven has to offer. Whether we’re talking about the firm’s new advertising tools, its powerful AI team hard at work on next-generation models, its relatively affordable line of headsets to plug into its metaverse, and its “moaty” family of social apps, Meta has no shortage of growth levers. In the coming month, Meta will be ready to launch the latest version of its open-source AI model: LLaMA 3
Over the next year, I expect the company to continue outpacing the market as it pulls all of them simultaneously.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, GOOGL) and Meta Platforms have seen increased business overlap in recent years.
Though Alphabet doesn’t share Mark Zuckerberg’s ambition for the future of the metaverse or virtual reality, both firms are clashing for generative AI dominance. Alphabet’s Google Gemini is a capable large language model (LLM) that competes with OpenAI’s ChatGPT and Meta’s LLaMA.
It’s not just AI where Alphabet will compete against Meta for market dominance. Alphabet’s YouTube platform competes against Meta’s social-media family of apps in a battle for user engagement. In the short-form video scene, YouTube Shorts and Meta Reels could take their battle to the next level if some sort of TikTok ban were implemented in the U.S.
Either way, Alphabet may very well be home to the most influential social media platform. With Shorts and live streaming, it will be interesting to see how the ecosystem evolves in the age of AI-created content.
Tencent (TCEHY)
Tencent Holdings (OTCMKTS:TCEHY) is the social media powerhouse in China, with its dominant super-app WeChat bringing in more than 1.3 billion monthly active users as of the latest quarter. Undoubtedly, WeChat has branched out to offer a wide range of services to monetize the firm’s massive user base. From payments to gaming, WeChat is pretty much a mobile operating system within a single app.
Though Tencent’s dominance puts it at risk of increased regulatory scrutiny, the firm has taken steps to ensure it’s playing by the Chinese government’s rules to avoid costly penalties and hurdles that could weigh on future growth.
At the time of this writing, TCEHY shares trade at 23.4 times trailing price-to-earnings (P/E), making it one of the cheapest mega-cap social-media titans in the world. Still, off over 61% from its all-time high, Tencent shares look like a rather untimely bargain for those hungry for exposure to the Chinese economy while it’s still in a slump.
On the date of publication, Joey Frenette owns shares of Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.