In this article, we discuss 10 cheap social media stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Cheap Social Media Stocks to Buy.
In recent years, social media has emerged as a potent marketing tool for businesses of all sizes due to its diverse platforms and extensive reach. Nonetheless, social media trends can be fleeting, particularly as technology progresses and various platforms fluctuate in popularity. Staying up-to-date with trends is crucial in the world of social media. In the coming year, short-form videos, increased video budgets, content creation, and influencer marketing are expected to dominate. To safeguard content, data, and people on social media, Market Research Future's extensive research report predicts that the global social media security market will experience significant growth during the review period of 2022 to 2030, with a growth rate of approximately 16.40%. The market is expected to reach a size of around $3863.45 million by the end of 2030.
According to Insider Intelligence’s forecast, ad revenue growth will bounce back to 8.2% this year, following a historic 2.0% drop in 2022. Nevertheless, this growth will not be sufficient to reverse the declining share of ad revenue. The firm’s projection shows that Meta Platforms, Inc. (NASDAQ:META)’s portion of global digital ad spending reached its highest point of 22.0% in 2021 but will decrease to 19.4% this year. Facebook's worldwide monthly users will only increase by 0.3% this year, and for the first time, its share of internet users will fall below 45%. Additionally, Instagram's ability to compensate for Facebook's losses is decreasing, as its monthly user base will grow by 4.7% this year, but its share of global internet users will only increase by less than one percentage point, to 28.7%.
In 2023, the advertising revenue for TikTok and Douyin, which are social platforms owned by ByteDance, is expected to increase by 24.5%. As a result, ByteDance's share of worldwide digital advertising expenditure is predicted to reach 5.8%, which is more significant than the combined share of LinkedIn, Snapchat, Twitter, and YouTube. Moreover, by 2023, the total monthly user base for both apps is estimated to reach 1.70 billion users, which will make up 36.5% of all internet users globally and 45.2% of all social network users. Due to the chaotic atmosphere on Twitter, many users are abandoning the platform and opting for alternative ones that promote free conversations. This hunt for the next significant social app for Generation Z is fueling the quick expansion of platforms like BeReal and Gas, which serves as a caution for Snapchat and TikTok. If US lawmakers or regulators don't impede its growth, TikTok is set to join Facebook and Instagram as the third social network to exceed 100 million monthly users in the US by 2023.
Some of the best social media stocks to invest in include Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META).
Our Methodology
We chose the top cheap social media stocks based on overall hedge fund sentiment, with P/E ratios of less than or close to 29 (Software – Internet average industry PE ratio is 29) as of April 4. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the fourth quarter of 2022. The list is arranged in ascending order of the P/R ratio for each stock.
10 Cheap Social Media Stocks to Buy According to Hedge Funds
Cheap Social Media Stocks to Buy According to Hedge Funds
10. Hello Group Inc. (NASDAQ:MOMO)
Number of Hedge Fund Holders: 20
P/E Ratio as of April 4: 8.38
Hello Group Inc. (NASDAQ:MOMO) is a company that offers social and entertainment services through mobile devices in China. The company manages the Momo platform, which comprises a mobile application, as well as related properties, features, functionalities, tools, and services. On March 16, Hello Group Inc. (NASDAQ:MOMO) reported a Q4 non-GAAP EPADS of $0.36 and a revenue of $465.8 million, outperforming Wall Street estimates by $0.08 and $2.53 million, respectively. Hello Group Inc. (NASDAQ:MOMO) declared a $0.72 per share annual dividend on March 21, in line with previous. The dividend is payable on May 22, to shareholders of record on April 28.
On February 16, Morgan Stanley downgraded Hello Group Inc. (NASDAQ:MOMO) from Overweight to Equal Weight, while increasing its price target from $9 to $12. The company is expected to benefit from the reopening of mobility and dating apps in China, but the firm believes that the stock's current price is fairly valued compared to its peers, especially after experiencing a more than 100% increase over the past three months. To demonstrate growth acceleration beyond the reopening, Morgan Stanley suggested that Hello Group Inc. (NASDAQ:MOMO) needs to make significant product breakthroughs.
According to Insider Monkey’s fourth quarter database, 20 hedge funds were long Hello Group Inc. (NASDAQ:MOMO), compared to 17 funds in the last quarter. The combined stakes held by elite funds in Q4 2022 amounted to $244 million, up from $114.4 million in Q3.
Like Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META), Hello Group Inc. (NASDAQ:MOMO) is one of the best social media stocks according to hedge funds.
Yalla Group Limited (NYSE:YALA) runs a social networking and entertainment platform called Yalla, which focuses on voice communication. The platform is primarily used in the Middle East and North Africa, providing services such as group chatting and games. It also offers virtual items for sale and upgrade services. The company was established in 2016 and is based in Dubai, United Arab Emirates. On March 13, Yalla Group Limited (NYSE:YALA) reported a revenue of $75.11 million, up 11.2% year-over-year, beating market estimates by $0.26 million. As of December 31, 2022, the company had cash and cash equivalents of $407.3 million, compared to $391.2 million as of September 30, 2022. For Q1 2023, Yalla Group Limited (NYSE:YALA) expects revenues to be between $68.0 million and $75.0 million. It is one of the best cheap social media stocks to invest in.
According to Insider Monkey’s fourth quarter database, 4 hedge funds were long Yalla Group Limited (NYSE:YALA), with combined stakes worth $3.8 million. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 164,889 shares worth $577,112.
JOYY Inc. (NASDAQ:YY) manages social media platforms that provide users with an interactive and immersive experience through video and audio-based social platforms. The company runs Bigo Live, which is a platform for live streaming that enables users to broadcast their talent, connect with others globally, and socialize. Likee is another platform that focuses on short-form videos for users to create content. Additionally, Hago is a casual game-based social platform, and JOYY Inc. (NASDAQ:YY)’s imo is a chat and instant messaging application that offers various features such as video calls, group calls, and document sharing. It is one of the best cheap social media stocks to watch.
On March 16, JOYY Inc. (NASDAQ:YY) reported a Q4 non-GAAP EPADS of $0.65, beating market estimates by $0.36. The revenue of $604.9 million came in-line with Wall Street consensus. For the first quarter of 2023, the company expects net revenues to be between $552 million and $570 million, versus a consensus of $593.50 million.
Benchmark analyst Fawne Jiang reiterated a Buy rating on JOYY Inc. (NASDAQ:YY) but lowered the firm's price target on the shares to $49 from $62 on March 17. The company's Q4 results were reported as "moderately above-expectation," but there is still a lack of visibility for FY23, leading the firm to adjust its estimates cautiously. The analyst explained that this approach was taken due to the uncertainty surrounding the company's future performance.
According to Insider Monkey’s fourth quarter database, 20 hedge funds were bullish on JOYY Inc. (NASDAQ:YY), compared to 17 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a significant position holder in the company, with 1.2 million shares worth $39.2 million.
Here is what Tao Value had to say about JOYY Inc. (NASDAQ:YY) in their Q1 2021 investor letter:
“We exited YY after 3.5 years near an all-time high. The annualized return (13~%) is below expectation, especially compared to founder CEO David Xueling Li’s net worth (mainly in YY shares) ballooning from $1.1B in 2018 to $2.3B in 2021. On value realization, I think YY did a good job, acquiring Bigo, spinning off then selling Huya & selling YY Live to Baidu. But as a minority shareholder, we were treated unfairly. E.g. the Bigo deal (for buying shares from executives including Li) was done by YY stock when the price was severely depressed, causing significant dilution for our ownership. We learned our lessons and will evaluate more rigorously in management’s partnership mindset in the future.”
7. Tencent Holdings Limited (OTC:TCEHY)
Number of Hedge Fund Holders: N/A
P/E Ratio as of April 4: 18.56
Tencent Holdings Limited (OTC:TCEHY) is an investment holding company that delivers value-added services and online advertising services in China and internationally. Its operations are divided into various segments, including VAS, Online Advertising, FinTech and Business Services, and Others. The company's consumer business provides communication services, such as instant messaging and social networking, as well as digital content like online games, videos, live streaming, news, music, fintech, and literature. Tencent Holdings Limited (OTC:TCEHY) is one of the top cheap social media stocks to invest in.
On April 3, Loop Capital upgraded Tencent Holdings Limited (OTC:TCEHY) to Buy from Hold, with a price target of HK$455, up from HK$345. The firm noted that both the company's core gaming and payments engines show promising signs for valuation, as well as a positive outlook for advertising revenue growth. With revenue growth expected to increase in Tencent Holdings Limited (OTC:TCEHY)’s core segments, the stock is expected to perform well due to the predicted improvement of macroeconomic conditions, as stated in the research note by Loop Capital.
NetEase, Inc. (NASDAQ:NTES) offers online services including diverse content, community, communication, and commerce in China and internationally. The company operates via three segments – Online Game Services, Youdao, Cloud Music, and Innovative Businesses and Others.
On February 28, JPMorgan analyst Daniel Chen upgraded NetEase, Inc. (NASDAQ:NTES) to Overweight from Neutral with a price target of $100, up from $85. Despite the company's share price dropping by 8% since its Q4 report, the analyst believes that NetEase, Inc. (NASDAQ:NTES) is set to enter a new game launch cycle in March, creating a buying opportunity for investors. Additionally, the firm is more positive about the sustainability of Eggy Party, following its strong performance post the Chinese New Year.
According to Insider Monkey’s fourth quarter database, 31 hedge funds were bullish on NetEase, Inc. (NASDAQ:NTES), compared to 24 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with 4.60 million shares worth $334.3 million.
In addition to Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META), elite hedge funds are piling into NetEase, Inc. (NASDAQ:NTES).
